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Discover the Market’s Strongest Stocks

July 9, 2021

The first three sessions of this holiday-shortened week have been down across the board for the major indexes, but as has been the case, the damage has been tame in some places and harsh in others. Big-cap indexes are down less than 1% (and should be flat-ish after this morning’s open), while broad market indexes (NYSE Composite, small- and mid-caps) are down 2% to 3%, mostly due to weakness in financials, energy and transports.

The first three sessions of this holiday-shortened week have been down across the board for the major indexes, but as has been the case, the damage has been tame in some places and harsh in others. Big-cap indexes are down less than 1% (and should be flat-ish after this morning’s open), while broad market indexes (NYSE Composite, small- and mid-caps) are down 2% to 3%, mostly due to weakness in financials, energy and transports.

That action in the broader indexes has put the overall intermediate-term trend on the fence, as some have sliced their 50-day moving averages, though overall remain in wide, multi-month ranges. Moreover, market-wide, it’s a fact that things are getting narrow—coming into today, just 40%-ish of stocks are above their respective 50-day lines. Indeed, a few stocks tripped their stops this week while many others came close.

For growth stocks, though, the action remains constructive, though tricky. Yes, there is still plenty of volatile action (a decent amount of stocks will look good and then slip on 5% to 8% dips over just three or four days), and a lot of names rally into resistance and then are smacked back (take a look at SNAP and TXG, for instance). That’s why we continue to think it’s best to go slow and pick your entry points carefully.

But we’re also seeing three things among growth titles that’s keeping us optimistic. First, we’ve seen a ton of stocks race back toward their old highs, setting up in multi-month launching pads. Second, while there have been some wobbles, most of those names have refused to budge much during the past week or two. And third, the names that have busted loose on the upside are still in good shape—the early leaders aren’t showing any signs of abnormal action.

Of course, we’d really like to see more breakouts and upside power to conclude the party is on. But, just going with what we see, there’s more good than bad among growth stocks, though like we wrote above, it’s best to pick your spots and generally aim for dips. We’ll keep our Market Monitor at a level 7, but given all the crosscurrents out there, we’re keeping our eyes peeled for whatever the market throws at us.

Suggested Buys
Lightspeed POS (LSPD) broke out nicely in mid-June on good (not ground-breaking) volume, reached as high as 88 and has since pulled back as low as 79 yesterday (finding support near its 25-day line) before bouncing a bit. It probably needs a little time, but if you don’t own any, you can take a swing at it here with a stop near 73.

Energy stocks have definitely been hit, but some that are more tilted to natural gas (which is acting great) are holding up pretty well. Range Resources (RRC) looks like one to target on dips—a retreat into the 15 to 15.5 range (it’s a very volatile name) would be tempting, with a stop just below 14.

More generally, we’d keep an eye on some of the still-resilient growth stocks out there—there are no guarantees, but odds favor further weakness into some support areas will be buyable: Cloudflare (NET), Nvidia (NVDA) and DocuSign (DOCU) are three examples; aim for dips of a few percent from here, start small and use loss limits in the 10% range if opportunities arise.

Suggested Sells
The following names tripped their stops and are sells:

Analog Devices (ADI)
Boot Barn (BOOT)
Cleveland Cliffs (CLF)
Children’s Place (PLCE)
Sea Ltd. (SE)

Suggested Stops
American Eagle (AEO) near 32.5
Academy Sports (ASO) near 36
Align Technology (ALGN) near 595
ASML Holding (ASML) near 655
Biogen (BIIB) near 340
Bonanza Creek (BCEI) near 42.5
Callon Petroleum (CPE) near 46.5
CareDx (CDNA) near 82.5
Dick’s Sporting Goods (DKS) near 92
International Game Tech (IGT) near 21.5
Lightspeed POS (LSPD) near 73
Jabil Circuit (JBL) near 55
Marathon Oil (MRO) near 12.2
Matador Resources (MTDR) near 30
Scientific Games (SGMS) near 65
Summit Materials (SUM) near 32.5
United Parcel (UPS) near 203
Vale (VALE) near 21
Vista Outdoor (VSTO) near 39
Yeti (YETI) near 86