Things had been a bit too quiet in the market, and that usually results in some unexpected action, and we’re starting to see that now—many leading cyclical stocks and sectors have broken down, while yesterday, growth stocks (especially the winners from last year) ramped … basically, another big round of rotation. Today, though, we’re seeing the sellers hit everything, growth and cyclical alike.
Our main thought with the overall environment is simply: Things remain tricky and challenging, with trends tending to last just two or three weeks before some big reversal comes. That means your timing has to be precise and you should be taking partial profits relatively quickly if you develop profits at all.
However, that’s not to say it’s all dour at all. As we’ve written in recent weeks, we do think the action among growth stocks is more positive than negative—growth-oriented indexes have perked up, secondary indicators look pretty good and we’re seeing more and more names set up in multi-month bases, with some poking out to new highs.
For cyclical stocks, a bounce is certainly possible—a re-rotation, if you will—but after such big runs and a loss of momentum in recent weeks, we wouldn’t be ignoring the cracks in those areas. We have many sells in tonight’s issue, and we’re glad we had been paring back on these names a bit before this.
All in all, we’re not making any drastic change in our overall market view—growth seems to be putting it together, while cyclicals are likely starting a correction/consolidation phase. However, making (and keeping) any real money remains tricky, so we still think going slow and aiming for dips (especially in stocks that have ramped for the past three weeks) makes the most sense. As an added measure, we suggest focusing on names that have shown outsized buying volume, which usually suggests that there will be support on pullbacks.
SUGGESTED BUYS
International Game Tech (IGT) has pulled in with most turnaround-type names, but as opposed to many, the retreat looks very reasonable—from a breakout in the 19-20 area, up to 26-plus, and now down to 23 on light volume. Yes, it could just keep sliding, but we’re OK starting a stake here if you don’t own any, with a stop in the 20 to 21 range.
SUGGESTED SELLS
We have many stocks that cracked this week—while selling is rarely fun, we’re pleased that our trailing stops took us out of most of these names just as they dove below support:
Adient (ADNT)
ArcelorMittal (MT)
Avery Dennison (AVY)
CF Industries (CF)
Cimarex Energy (XEC)
Franklin Resources (BEN)
Goldman Sachs (GS)
KBR Inc. (KBR)
Leggett & Platt (LEG)
Robert Half (RHI)
Steel Dynamics (STLD)
Toll Brothers (TOL)
SUGGESTED STOPS
Academy Sports (ASO) near 34.5
Acuity Brands (AYI) near 176
ASML Holding (ASML) near 643
Boot Barn (BOOT) near 70.5
Callon Petroleum (CPE) near 40.5
Calloway Golf (ELY) near 31.5
Cleveland Cliffs (CLF) near 20
Crocs (CROX) near 97.5
Discover Financial (DFS) near 110
EOG Resources (EOG) near 77.5
General Motors (GM) near 57
International Game Tech (IGT) near 20.5
Jabil Circuit (JBL) near 54
Nucor (NUE) near 92
Schlumberger (SLB) near 30.5
SeaWorld (SEAS) near 50
Summit Materials (SUM) near 31
United Parcel (UPS) near 193
Vale (VALE) near 20.4
Wesco (WCC) near 97.5
Yeti (YETI) near 82.5