After some solid up weeks, the major indexes are down a bit so far this week, with the bigger blows seen among the broad market, as small- and mid-cap stocks are down 2% or so coming into today, while the bigger-cap indexes are down a bit less.
Interestingly, the market saw some distribution on Tuesday and then had two straight good-sized gap downs and intraday slides on Wednesday and Thursday—but each day saw volume fade and the indexes fight back nicely by day’s end. More importantly, leading stocks also held firm, though most took on some water.
All told, the weakness isn’t surprising given the recent run; even at yesterday’s lows, no major index came very close to its 25-day line (never mind the 50-day line, which we use for intermediate-term signals), and breakdowns among strong stocks are few and far between.
Thus, nothing has really changed with our thinking—we’re mostly bullish as most of the evidence is positive, but given the elevated sentiment, the extended run since the election kick-off (now 16 weeks) and the lack of great entry points, it’s also best to be discerning on the buy side, looking for earlier-stage opportunities at halfway decent entry points. Indeed, many of the hottest areas from just two or three weeks ago (alternative energy, marijuana) are getting hit of late, stripping away much of the huge gains seen in the prior advance.
Looking ahead, if the market and leaders continue to gyrate, we do think there could be some great opportunities—recent earnings winners that stabilize or new earnings winners (many report next week) that pop could offer high-odds buy points. Right now, we’re remaining mostly bullish, but we don’t advise plunging into the market with new money this second.
SUGGESTED BUYS
10x Genomics (TXG) hit a wall at round-number resistance near 200 and has pulled back with the market and then shook out after earnings yesterday. But the chart looks fine and the outlook (60%-plus revenue growth in 2021) is solid. If you don’t own any, starting a position here with a stop in the upper 160s makes sense.
One Medical (or 1Life) (ONEM) broke out of a big IPO base in mid-January and stretched from 45 to 60 before finally getting hit. Earnings are due next week (February 25), but if you want to roll the dice, a bit more weakness (maybe to the 25-day line, which is at 52 and rising rapidly) would be tempting to start a position and see what the quarter brings.
Shopify (SHOP) has obviously had a monster run in recent years, but after a shakeout with the GameStop-induced market dip, the stock ripped to new price and RP peaks before sagging some on earnings. Could it fail from here? It could. But we’re OK taking a stab at it around here or on further weakness, with a stop around 1,230.
SUGGESTED SELLS
Inseego (INSG) – tripped stop; disappointing action off a solid-looking setup
Mosaic (MOS) – big run in recent months, big-volume reversal on earnings out of short base
Peloton (PTON) – tripped stop, break of 50-day line
TG Therapeutics (TGTX) – tripped stop, break of 50-day line
SUGGESTED STOPS
10x Genomics (TXG) near 167
AGCO (AGCO) near 108
Align Technology (ALGN) near 535
Cimarex Energy (XEC) near 44
Cleveland-Cliffs (CLF) near 15.2
Cloudflare (NET) near 77
Enterprise Product Partners (EPD) near 20.5
Floor & Décor (FND) near 92.5
General Motors (GM) near 48
GrowGeneration (GRWG) near 46.5
Guardant Health (GH) near 148
Inari Medical (NARI) near 95
Marvell Tech (MRVL) near 49
Michael’s Stores (MIK) near 14
MongoDB (MDB) near 364
PagerDuty (PD) near 48
Palo Alto Networks (PANW) near 360
PayPal (PYPL) near 259
Pinduoduo (PDD) near 171
Redfin (RDFN) near 77
Schrondinger (SDGR) near 91
Snap (SNAP) near 54
Sonos (SONO) near 30
Tapestry (TPR) near 33.5
Vale (VALE) near 16.9