It’s been a mixed week for the market. On one hand, we like some of the support seen in the major indexes and some key leading stocks this week, especially given the numerous intraday dives that occurred. On the other hand, there hasn’t been much upward progress and we have seen a few leading stocks crack key support.
In the short term, then, we still don’t see much of an edge. The broad market (small- and mid-cap indexes) have been consolidating for five weeks, and along with some recent signs of worry (big outflow from equity funds and ETFs last week), that could be enough of a rest.
That said, we’ve seen a pickup in selling pressure on leading stocks this week, and the divergences that popped up two weeks ago might need more time to work their way through the system. Indeed, our intermediate-term trend model is now effectively neutral as many major indexes are hanging around their 50-day lines.
So what to do? Take things on a stock-by-stock basis for stuff you own—definitely hold onto your strong, profitable stocks (though partial profits are fine), but for losers and laggards, make sure you have stops in place. And on the buy side, it’s best to pick your spots and look for names that are either tight or have dipped toward (and held) some support.
Broadening our view, the good news is that nothing we’ve seen in the market this week (or the past few weeks) looks abnormal on a big-picture basis. Said another way, most of the evidence still points toward the market having etched a major low last year, with the first two-plus months of 2019 kicking off a new, sustained advance.
Long story short, we remain mostly bullish and aren’t changing our stance much—we’re likely to keep our Market Monitor at a level 7. But we also think it’s prudent to step carefully until we see the major indexes, the broad market and leading stocks firm up.
BUY IDEAS
Incyte Corp. (INCY 86) peaked at the start of the month and has been consolidating ever since, mostly on low volume, while the 50-day line (now near 83) catches up. If you don’t own any, we think you could buy a small position here with a stop around 80.5, and look to average up on a push above 89 or so (moving the stop to 82 or so).
ServiceNow (NOW 245) is more of a well-sponsored blue chip in the cloud software field, so it doesn’t make many dramatic moves. But it’s basically been holding its 25-day line during the market’s wobbles this month, and on the weekly chart, the past few weeks look like a normal pause after its big post-earnings run. We think you can enter here, with a stop in the low 220s.
We can’t say it’s at a perfect entry point, but we’re very impressed with the action of Universal Display (OLED 153), which has barely pulled back at all despite the broad market’s sluggishness and its own huge run. If you don’t own any, we’re not opposed to buying a small position here or on dips below 150, with a stop in the 135 area.
SELL IDEAS
We have four outright sells today either because they tripped their stops or otherwise broke down: Cronos (CRON 18), Exact Sciences (EXAS 86), iQIYI (IQ 23) and Kirkland Lake (KL 31).
SUGGESTED STOPS
Amarin Corp. (AMRN 19) near 16.9
Array Biopharma (ARRY 24) near 21.5
Atlassian (TEAM 111) near 103
Bootbarn (BOOT 29) near 26
Chart Industries (GTLS 91) near 84
Ciena (CIEN 37) near 36.9
DocuSign (DOCU 52) near 50
Entegris (ENTG 35) near 33.5
Etsy (ETSY 68) near 62.5
Guardant Health (GH 78) near 69
Incyte Corp. (INCY 86) near 80.5
LendingTree (TREE 350) near 305
Match.com (MTCH 56) near 52.5
Mirati Therapeutics (MRTX 74) near 67
Netflix (NFLX 355) near 340
Planet Fitness (PLNT 68) near 60.5
ServiceNow (NOW 245) near 222
Smartsheet (SMAR 40) near 38
Tencent Music (TME 18) near 16.3
Veeva Systems (VEEV 126) near 115