Not to sound like a broken record, but it’s been yet another constructive week in the market. After four weeks of straight-up action, the major indexes and most leading (and potential leading) stocks are basically holding firm, with the S&P 500 and Nasdaq relatively flat on the week.
The good news is that, despite the pause, our intermediate-term model (we call it the Cabot Tides) turned positive this week, adding another piece of evidence—from the historic oversold readings in December, extreme pessimism near the lows and the 2-to-1 Blastoff Indicator in January—to the bullish camp.
Of course, we’re only three-plus days into this market pause, so there’s nothing that says we can’t come in next week and see the sellers do more work. Said another way, we still wouldn’t rule out some short-term gyrations given the fact that the longer-term trend is still pointed down (below 200-day lines, etc.) and some bottom building (including a full or partial retest of the December lows) would be normal. Thus, we’re still picking our spots.
But our biggest thought right now is that the market is doing exactly what you’d expect if it had hit bottom, if the sellers are sold out and if there’s going to be a good run going forward. Obviously, this is descriptive and not predictive (the evidence can change), but so far, so good.
As for individual stocks, there have been a couple of names (like DXCM and VRTX) that have hit some potholes, but in the context of their prior runs, it’s not the biggest deal. Basically, we’ve yet to see any abnormal action, which is a plus.
All told, with the intermediate-term trend now up, we’re leaning bullish, though we still think it’s best to step (not dive) into the market’s waters as opportunities appear.
BUY IDEAS
CyberArk (CYBR 79) has paused nicely during the past week and a half, ideally putting the finishing touches on its four-month launching pad. We’re OK buying some here (with a stop around 72) with the idea of buying more on a breakout above 82 (and move the stop to 74-75 on the whole position at that point).
We remain very intrigued by a couple of turnaround-type charts, including Incyte (INCY 79), which built a multi-month bottom, zoomed above all its moving averages after the market bottom and has held firm since. Ideally you can get some shares in the 76-77 area, but we’re not against just buying some around here. A stop in the 70 area makes sense if you enter.
Tableau Software (DATA 127) had been a disappointment this month, but after testing its 50-day line a couple of times, it may be coming to life—shares are surging on good volume this morning, rallying back toward their old high. We’re OK starting a position around here with a stop near 118, and looking to add more shares on a push above 132 or so.
It’s new and volatile, but Tencent Music (TME 15) has shown excellent action, ripping out of a post-IPO base on huge volume in recent days. Taking a small position on today’s pullback (or further weakness) and using a loose stop (around 13.5) is an idea.
Vertex Pharmaceuticals (VRTX 188), which was written about two weeks ago, pulled back this week after the COO was kicked out, but the dip is more than reasonable compared to the prior run. Some further retrenchment is possible, but if you don’t own any, we’re OK grabbing shares around here with a stop in the 173 area.
SELL IDEAS
We’re going to sell Buenaventura (BVN 16) today, as the stock has been underperforming its peers and didn’t bounce impressively today, despite the rally in gold prices.
Tesla (TSLA 293) is also a goner after its big-volume dip through recent support.
Kirkland Lake (KL 29), on the other hand, looks like the top gold stock on the market, and it’s pushed ahead strongly this week. If you have a good profit, you could consider selling some (maybe one-third of your shares) and hold the rest.
SUGGESTED STOPS
Atlassian (TEAM 95) near 87
Cooper Tire (CTB 34) near 32
ServiceNow (NOW 191) near 178