We discussed a couple of weeks ago how early January is usually volatile, and this year has been no different—in fact, with the headlines out of Washington, D.C., Georgia and more, we’ve seen even more whippy action than normal, with big moves in the indexes and especially among individual stocks and sectors, with 4% moves up and down happening nearly every day.
Despite the wild moves, nothing has really changed with the evidence—the primary trends of the major indexes are obviously firmly up (most have hit new highs in recent days), and even when leaders wobbled a bit earlier this week, there were no abnormal actions or major breakdowns—and of course many have snapped right back.
On the flip side, it’s pretty clear things are a bit hot and heavy; the number of stocks hitting new highs on the NYSE and Nasdaq combined was above 900 yesterday! Interestingly, maybe because of the uncertainty of late (elections, etc.), sentiment has actually cooled off a bit when looking at certain surveys and money flows. Even so, it’s fair to say there’s more greed than fear out there.
Boiling all this down to action items, in the very short-term (next few days), we’re mostly content to watch and wait, mainly to see if things can settle down—when stocks are moving 5% a day, it’s hard to find any sort of lower-risk entry points. That doesn’t mean you can’t do some buying, but be discerning and think about starting small.
Overall, though, we’re still bullish—the blastoff-type indicators that flashed in early November have done a good job to this point and hint toward further gains down the road. Just be sure to plan on volatility remaining elevated as earnings season is around the corner. We’ll likely keep our Market Monitor at a level 7, though as we wrote on Monday, we’ll also keep our eyes peeled for any air pockets that may arise.
SUGGESTED BUYS
Cardlytics (CDLX) fell to 135 earlier this week, tagging its 25-day line for the first time since its kickoff began in early November. More near-term wiggles are possible, but if you didn’t buy any before, we’re OK taking a swing at it here with a loose stop (mid-120s).
HubSpot (HUBS) broke out in early November, rallied as high as 420 last month and had a dip to its 50-day line (near 370) this week before bouncing nicely yesterday (albeit on low volume). Our guess is this pullback might take more time, so a controlled dip back to 385 or so would be a good risk-reward situation, with a stop near 350.
Inspire Medical (INSP) isn’t early in its overall run, so risk is higher. But the stock is now five weeks into a tight consolidation as the 50-day line (now near 180) catches up. We’re OK starting small (stop in the 175 area) and adding if the stock heads higher from here.
Snap (SNAP) gapped out of a base on explosive (10x) volume in October, and it marched its way into the mid-50s last month. Now shares are four weeks into a tight rest while the 50-day line (46 and rising) catches up—which would be the first test of the 50-day line since getting going. We’re OK starting small here (or preferably on dips of a point or two) and adding on the way up (stop near 45).
SUGGESTED SELLS
Don’t forget to take a partial profit or two in names that you’ve had for a few weeks and have gone bananas. Albemarle (ALB) has acted well for a while, especially this week, and exploded higher on massive volume. Big picture, it will probably go higher, but near-term, it’s probably vulnerable—consider selling some and holding the rest with a trailing stop. Celsius (CELH) is another example.
As for outright sells:
Bunge (BG) – taking a profit
Exact Sciences (EXAS) – tripped stop
Paycom Software (PAYC) – tripped stop
Taiwan Semi (TSM) – booking a great profit, stock extended in time and price
SUGGESTED STOPS
Adient (ADNT) near 33
Align Technology (ALGN) near 480
Canopy Growth (CGC) near 26
Carrier Global (CARR) near 37.5
Celsius (CELH) near 42.5
Cloudflare (NET) near 69
Freeport McMoRan (FCX) near 26
General Motors (GM) near 40.5
GrowGeneration (GRWG) near 35
HubSpot (HUBS) near 364
Kodiak Sciences (KOD) near 130
Marvell Tech (MRVL) near 44.5
Qorvo (QRVO) near 155
Qualcomm (QCOM) near 143
Quanta Services (PWR) near 69
Redfin (RDFN) near 62
Smartsheet (SMAR) near 63
Sonos (SONO) near 21
Tapestry (TPR) near 29
Zillow (Z) near 121