Heads up: Just a reminder our offices are closed Monday for President’s Day, so your next issue of Cabot Top Ten Trader will come out next Tuesday, February 16. Have a great long weekend!
It’s looking like another constructive week for stocks, as the major indexes are trading in the black, led by the strong small-cap area (up nearly 3%). Thanks mostly to last week’s powerful rebound, the intermediate-term trend of the indexes remains firmly up.
As for individual stocks, most of the vibes are positive as well—not only have there been very few breakdowns, but the shakeout-and-snapback action in recent weeks generally bodes well. Moreover, we’re actually seeing some fresh breakouts (like Dynatrace in this week’s issue), though we wouldn’t say that’s the norm at this point.
With that said, we’re also seeing a few more signs of iffy action out there. Marijuana stocks are a good example—the high-profile, news-driven upmoves followed by yesterday’s abnormal weakness is a red flag. And we’ve also started to see a bit more selling after earnings, even if the reports were “good”—not a trend yet but something to watch.
On the buy side, we still favor being discerning. It’s a bull market, so you don’t want to be too picky, but you also don’t want to throw caution to the wind 15 weeks into this intermediate-term advance in stocks that have just run a huge amount.
Thus, we’re not flooring the accelerator here; if you’re just throwing a dart or chasing whatever hot stock is in the news 15 weeks into an intermediate-term advance, there’s a good chance you could get hurt.
But the market’s primary evidence remains positive, so we remain mostly bullish, holding our strong performers while trailing stops and taking partial profits when offered. We’ll likely leave our Market Monitor at a level 7 and see what our screens show us next week.
SUGGESTED BUYS
We’re not seeing many good entries this second, but a lot of the stocks that (a) shook out two weeks ago and (b) soared back to new highs this week could be looked at for pullback entries.
Some examples would be Inari (NARI), LPL Financial (LPLA), MongoDB (MDB), Palo Alto Networks (PANW) and Schrondinger (SDGR).
SUGGESTED SELLS
Affiliated Managers (AMG) was just recommended a couple of weeks ago but had a super-bullish reaction to earnings. If you own some, consider taking partial profits on this windfall-type move, and then trail a stop for the rest.
It’s a similar story with Upwork (UPWK), which has gone up nicely during the past month – with earnings coming in two weeks, shaving off some shares now (if you haven’t yet) and hanging on to the rest makes sense.
Canopy Growth (CGC) and Cronos (CRON) – booking a profit as the island top this week smells bad. If you want to hold with a stop in the mid-/upper 30s (CGC) or 10.5 to 11 (CRON), that’s fine; frankly, a bounce-back of some sort wouldn’t surprise us. But the entire pattern looks abnormal, so we’ll take our chips and move on. If it sets up again maybe we’ll attempt to re-enter. The same goes for most weed stocks at this point.
SUGGESTED STOPS
10x Genomics (TXG) near 165
Align Technology (ALGN) near 528
Cimarex Energy (XEC) near 42.5
Cleveland-Cliffs (CLF) near 14.9
Cloudflare (NET) near 77
Enterprise Product Partners (EPD) near 20.2
Floor & Décor (FND) near 92
General Motors (GM) near 48
GrowGeneration (GRWG) near 45.5
Guardant Health (GH) near 145
Inari Medical (NARI) near 94
Inseego (INSG) near 17
Marvell Tech (MRVL) near 48.5
Michael’s Stores (MIK) near 14
MongoDB (MDB) near 360
Mosaic (MOS) near 25.5
Palo Alto Networks (PANW) near 350
PayPal (PYPL) near 244
Peloton (PTON) near 137
Pinduoduo (PDD) near 167
Redfin (RDFN) near 74
Snap (SNAP) near 52.5
Sonos (SONO) near 28
Tapestry (TPR) near 32.5
TG Therapeutics (TGTX) near 46
Vale (VALE) near 16.5