The selling that began in growth stocks last week broadened out in recent days, with the rest of the market coming under pressure. The major indexes are down 2% to 4% on the week, while growth-y indexes and funds are down even more.
Overall, it hasn’t been pretty, and there have been some implosions out there; the solid action in the metals sector of late fell by the wayside, for instance. But, at least for the moment, we’re still seeing more chop than outright breakdowns—in fact, many growth leaders (or potential leaders) have actually found a little support the past couple of days near key levels (50-day lines, etc.), while most cyclical stocks that have been reeled in are “only” back into their prior bases, not ripping lower.
Don’t get us wrong, though—the evidence has worsened. The market’s intermediate-term trend is back to neutral and even the Nasdaq is set to move below its 50-day line this morning. The number of stocks hitting new lows has begun to really pick up, a sign the selling is spreading. And, of course, even before this it’s not like there were scores of stocks galloping higher.
Overall, you should still be mostly taking things on a stock-by-stock basis; if you have a bunch of names that are pulling back grudgingly and otherwise acting fine, you can sit tight. But honoring stops is key for titles that go over the falls, and don’t forget to take partial profits here and there if you have some winners.
All in all, we’re going to move our Market Monitor back down to a level 6, but the next few days could be key—frankly, if a lot of names spike higher from here, it could offer some low-risk entry points (first bounce off 50-day lines or retests of supports is often buyable), but if this selling wave continues or intensifies, we’ll see a lot of broken charts. Stay tuned.
Suggested Buys
Chip stocks have become much trickier, but a few leaders have “only” pulled into support, which is normal. Marvell Technology (MRVL) is a good example, dipping steadily this month and tagging its 50-day line yesterday before a little bounce. We’re OK starting a position here with a tight stop in the 55 area.
Paycom Software (PAYC) isn’t near its moving averages, but it’s given up zero ground during the past two weeks of tedious action despite a big prior earnings move. If you don’t own any, we’re OK taking a swing at PAYC around here or on dips of 10 points or so.
Rapid7 (RPD) had a fantastic run starting in May, with an acceleration to new highs late last month. The pullback since then has done some damage, but we think it looks orderly as the 50-day line (now near 104.5) catches up. If you own some, hang on, and if not, you could nibble here.
Suggested Sells
Advanced Micro Devices (AMD) – nicked our stop.
Alcoa (AA) – reversal in metals stocks tripped loss limit.
Arista Networks (ANET) – same as AMD, just undercut the stop before rallying. If you want to give it a few points, no problem, but we’ll follow our rules.
Burlington Stores (BURL) – tripped stop before bouncing. Again, you can hang on if you own some but a fresh retreat below 330 would be a red flag.
Snap (SNAP) – tripped stop and below the high of the earnings gap.
Suggested Stops
Albermarle (ALB) near 199
Align Technology (ALGN) near 640
Alnylam Pharm (ALNY) near 182
ArcelorMittal (MT) near 30.5
ASML Holding (ASML) near 721
Atlassian (TEAM) near 298
Autonation (AN) near 106.5
Bath & Body Works (BBWI) near 59.5.
Bentley Systems (BSY) near 60
Bill.com (BILL) near 187
Dropbox (DBX) near 29.5
Horizon Therapeutics (HZNP) near 99
HubSpot (HUBS) near 599
LendingClub (LC) near 22.5
Lightspeed POS (LSPD) near 85
Marvell Technology (MRVL) near 55
ON Semiconductor (ON) near 40.5
Shopify (SHOP) near 1455
Sprout Social (SPT) near 92
Synaptics (SYNA) near 154
Tempur Sealy (TPX) near 40.5
Trane Technologies (TT) near 188
Under Armour (UAA) near 21.5
Zscaler (ZS) near 227