The markets had a mostly positive week, with most indexes up, and interestingly, the strength has been relatively broad based—whether it’s the big-cap indexes or small-cap indexes, growth or value, everything seems to be up in the 1% to 2.5% range.
This week’s upmove is certainly a good sign—as we wrote last week, many growth stocks, funds and indexes had dipped down to key support levels (50-day lines for many stocks, and price support for indexes), and while it hasn’t been a buying panic, the support shown is a plus.
The question now is similar to the one we had a month ago, the last time the market and growth stocks had dipped sharply and found support at key levels: Can this nascent bounce morph into something more persistent, breaking free of the endless rotation and chop we’ve seen for months? Given that this (by our measures) was the fifth wave of selling since the February peak, we’re cautiously optimistic such a change in character is possible.
But, as we’ve been writing for a while, we have to see it to believe it, especially as some other pieces of evidence are getting iffier—breadth, for instance, is something we’re keeping an eye on, as the advance-decline lines peaked back in June and the number of stocks hitting new lows has been uncomfortably high of late.
All in all, it’s been a good week for sure, with the action pretty much what we would have drawn up if we could. That keeps the choppy uptrend intact, but there’s still plenty of chop out there (strong stocks hitting potholes out of nowhere, etc.), so the same pick-your-spots game plan is in effect.
Suggested Buys
Nvidia (NVDA) tested its 50-day line for the second time during its advance last week ahead of earnings and has catapulted since on strong volume. You could nibble here, though we’d prefer to try to sharpshoot an entry in the 215-220 range, with a stop around 200.
Horizon Therapeutics (HZNP) broke out of a multi-month base late last month, extended higher on earnings and then, like so many stocks, spent a couple of weeks losing steam. But it found support at its 25-day line and has rebounded nicely since—we’re OK buying here or on dips, with a relatively tight stop near 101.
Suggested Sells
Autodesk (ADSK) – Earnings dump
Bentley Systems (BSY) – hasn’t really rebounded from the June peak and some big distribution this week
Dropbox (DBX) – no bounce of late to speak of, no progress since we wrote it up a month ago
Morgan Stanley (MS) – taking a profit. If you want to trail a stop near the 50-day line, you can, but we’re cashing out.
Partial profits: Zscaler (ZS) has ramped ahead of earnings next week—if you bought with us, consider cashing in a few chips and hold the rest.
Suggested Stops
Albermarle (ALB) near 205
Align Technology (ALGN) near 652
Alnylam Pharm (ALNY) near 184
ArcelorMittal (MT) near 31
ASML Holding (ASML) near 745
Atlassian (TEAM) near 303
Autonation (AN) near 107.5
Bath & Body Works (BBWI) near 61
Bill.com (BILL) near 203
Horizon Therapeutics (HZNP) near 101
HubSpot (HUBS) near 610
LendingClub (LC) near 23
Lightspeed POS (LSPD) near 88
Marvell Technology (MRVL) near 57.5
ON Semiconductor (ON) near 41.5
SAIA Inc. (SAIA) near 228
Sprout Social (SPT) near 96
Synaptics (SYNA) near 159
Tempur Sealy (TPX) near 41
Trane Technologies (TT) near 191
Under Armour (UAA) near 22.5
Zscaler (ZS) near 239