This week’s main theme was follow-on selling from last week’s mess, with most growth stocks remaining under pressure and (at least during the first three days of the week) the selling spreading to other nooks and crannies of the market. To be fair, we have seen a decent bounce in the broad market during the past couple of days, which has been enough to keep the intermediate-term trend of the major indexes and many cyclical names from cracking.
All in all, the overall picture is mostly the same—while the major indexes are doing their best to hang in there, there’s an increasing amount of damage among individual stocks that needs to be repaired. Obviously, much of that is among growth-oriented stocks (coming into today, 72% of Nasdaq stocks were below their 50-day lines, while half were below their 200-day lines), though we’ve also begun to see some other areas (some housing, some retail, etc.) flash iffy action.
Still, most financial, transport and many turnaround stocks are holding up well, so if you own them, continue to trail stops. The rub is that most are many months into their upmoves and are now starting to wobble a bit—nothing too worrisome, but the further along their rallies persist, the greater the risk that they’ll hit air pockets going ahead.
As we said above, the environment is mostly the same: Growth stocks are in corrections, and while bounces could come (some beaten-down names are trying to find support near longer-term support), the damage done of late will likely take time to repair. Meanwhile, the broad market has seen a small worsening of its evidence this week (more stocks cracked support), though it’s not an across-the-board thing at all.
Thus, we’re still in a similar split-tape environment—our overall Market Monitor will likely be either a 5 or a 6 come Monday, though it’s all about what stocks and sectors you’re looking at, with the broad market in far better shape than growth (biotech, software, Internet, e-commerce, etc.) stocks.
SUGGESTED BUYS
We have to highlight the action in KBR (KBR), which blasted off in late March and has been very cool, calm and collected in recent days, with little in the way of pullbacks and support at the 25-day line. If you don’t own any, we’re OK nibbling here with a stop in the 38 area.
Scientific Games (SGMS) broke out in late April before being pulled back down to its 25-day line by the market. But it found support there, and today, is popping back near its highs on earnings. In this environment, we don’t advise buying strength, but if SGMS backs off to 55 or 56, you can consider nibbling and using a stop around 50.
Summit Materials (SUM) has respected its 50-day line very nicely during the past couple of months, and now it’s finding some buyers, with shares rallying on great volume over the past three sessions. Again, we’re not huge on buying strength, but a dip of a point or so, with a stop near 29, would set up a nice risk-reward situation.
Vale (VALE) built a tight sideways base for the first three months of the year, broke out in early April and rallied nicely to as high as 23 on Monday before finally pulling back. This dip could go further, but so far, it looks tidy as the 25-day line (now at 20.3 and rising) catches up. We’re OK taking a swing at it here with a stop near 18.5.
SUGGESTED SELLS
Not surprisingly, many stocks (growth or otherwise) cracked key support this week, leading to a lot of sells:
Applied Materials (AMAT)
Brooks Automation (BRKS)
Cheesecake Factory (CAKE)
Diamondback Energy (FANG)
Lennar (LEN)
Marriott Vacations (VAC)
Nvidia (NVDA)
Qorvo (QRVO)
Scott’s Co. (SMG)
SelectQuote (SLQT)
SiteOne Landscape (SITE)
Square (SQ)
Thor Industries (THO)
Urban Outfitters (URBN)
SUGGESTED STOPS
Affiliated Managers (AMG) near 154
ASML Holding (ASML) near 595
Bloomin’ Brands (BLMN) near 27.5
Boot Barn (BOOT) near 66.5
Callon Petroleum (CPE) near 32.5
Chart Industries (GTLS) near 140
Cimarex Energy (XEC) near 60
Cleveland Cliffs (CLF) near 17.5
Goldman Sachs (GS) near 329
Goodyear Tire (GT) near 17.9
Jabil Circuit (JBL) near 50
Jack in the Box (JACK) near 111.5
Levi Strauss (LEVI) near 26.5
Middleby (MIDD) near 167
Nexstar Media (NXST) near 141
Nucor (NUE) near 85
Sally Beauty (SBH) near 21
Seagate Technology (STX) near 83
Steel Dynamics (STLD) near 56
Summit Materials (SUM) near 29.5
Tractor Supply (TSCO) near 181
United Therapeutics (UTHR) near 185
Yeti (YETI) near 77.5