From a top-down perspective, the week has been fine—the S&P 500 and Nasdaq are down less than 1% on the week as of this morning, while broader indexes (small and mid-caps) are up decently. All in all, that keeps the intermediate-term trend pointed nicely higher, with most indexes at least a few percent above their 50-day lines.
That said, we have started to see a bit of churning in some leading stocks—nothing to freak out about, but many names that pulled back at year end bounced back toward their highs … and are now seeing some renewed selling. Snap (SNAP) is one example, as it did rebound like it’s “supposed to” off its 50-day, but was caught up in the sector’s weakness yesterday. (If you own SNAP, we’d try to use a stop in the 47-47.5 area, which is right around the 50-day.)
Moreover, action among many speculative stocks remains hot and heavy—some names that were up huge last year have been gapping up most days this year, which usually is a sign there’s too much giddiness. Throw in the fact that we’re not seeing many high-odds entry points out there and we’d be discerning on the buy side.
Don’t get us wrong—we’re not suddenly running for cover, as the vast majority of stocks remain in strong uptrends, and most of those are what we would consider early in their overall runs. Thus, we’re still happy to hold winners and trail stops higher, and if we do get some pre- or post-earnings shakeouts in some names, there could be a rash of tempting opportunities.
For the moment, though, we’re bullish, but are content to mostly manage our positions and see how the market and leaders handle themselves. We’ll likely keep our Market Monitor at a level 7, but we’re more interested in buying pullbacks, especially if the market stumbles a bit going forward.
SUGGESTED BUYS
Many cyclical stocks continue to act pristine, including Alcoa (AA), which rested for most of December, spiked to new highs early this month and is now resting again, near 25. There should be solid support in the 21-22 area, so a nibble here or (preferably) on dips of 50 cents to a buck would be tempting.
General Motors (GM) likely isn’t going to run away on the upside, but it’s clearly changed character in recent months, and the recent bounce off the 50-day line (to multi-year highs) came on massive volume. We think dips of a couple of points would be buyable if you don’t own any, with a stop near 44.
Just a general note: While many tech- and internet-related names are churning a bit, we’re intrigued that most cybersecurity names are holding firm. CrowdStrike (CRWD) and Zscaler (ZS) are the new-age leaders, while Palo Alto Networks (PANW) is a less volatile play—all are acting well here. We’re not opposed to small positions here, but prefer aiming for dips should the market pull in at all.
SUGGESTED SELLS
Applied Materials (AMAT) is one of those names that just emerged from a long-term launching pad in November, so we think it can go higher over time. But it’s also had a big move since then, and yesterday’s gap higher could be a bit short-term exhaustive. If you have a solid gain, you can consider booking partial profits, though we’d hold onto most of your shares and try to play out a larger move.
Other partial profit ideas include Lam Research (LRCX; same group as AMAT), Roku (ROKU) and Michael’s Companies (MIK), which has boomed this week.
Also…
Cardlytics (CDLX) – abnormal selling this week after a big run
Celsius (CELH) – booking a (huge) profit, and stock is very extended
Yeti (YETI) – booking a profit after a 10-week post-breakout run, extended to the upside
SUGGESTED STOPS
Adient (ADNT) near 33
Albermarle (ALB) near 150
Align Technology (ALGN) near 490
Bill.com (BILL) near 122
Canopy Growth (CGC) near 28.5
Carrier Global (CARR) near 38
Coeur Mining (CDE) near 8.7
Cloudflare (NET) near 70
Freeport McMoRan (FCX) near 26.5
General Motors (GM) near 44
GrowGeneration (GRWG) near 37.5
HubSpot (HUBS) near 370
Kodiak Sciences (KOD) near 133
Marvell Tech (MRVL) near 45.5
MongoDB (MDB) near 320
Qorvo (QRVO) near 162
Qualcomm (QCOM) near 145
Quanta Services (PWR) near 69.5
Redfin (RDFN) near 63
Smartsheet (SMAR) near 63.5
Snap (SNAP) near 47
Sonos (SONO) near 23
Tapestry (TPR) near 29.5
Zillow (Z) near 123