It’s been another constructive week for the market, though that’s not necessarily due to the major indexes, which are barely up (0.25% or so) since last Friday’s close. Instead, we’re encouraged to see many of the technology-oriented leading stocks that were testing key support find solid buying in recent days.
Looking at it from another angle, this felt like the third or fourth “test” the market and/or leaders have faced since the start of the year—and to this point, each test resulted in just the type of action you want to see if you’re a bull.
That said, we still would be taking things mostly on a stock-by-stock basis at this point, especially as we head into earnings season—there are plenty of stocks that are extended, and others that did take hits and haven’t bounced that well. On the other hand, we’re seeing an increase in the number of potential setups out there, as many early leaders have built new launching pads since the start of March.
Yes, there are still some flies in the ointment out there—small-cap indexes are still below where they were in late February, etc.—but the majority of evidence is bullish, so we are, too. We could nudge up our Market Monitor a notch next week.
At this point, it’s mostly about following your plan: On the buy side, look for decent entry points and stick with leaders (stocks at or near their highs). And then manage those holdings by honoring loss limits, taking some partial profits on the way up and trailing a stop for the rest.
One last note: We’re getting a fair number of questions about the market’s rotation, which continues on almost a daily basis; this morning we see financial stocks rallying after bullish earnings, while many growth stocks actually pull in a bit. Instead of something to worry over, you can use the rotation to your advantage, though—try to buy good-looking names on normal weakness when the market rotates out of the sector for a few days.
BUY IDEAS
Chart Industries (GTLS 89) has pulled back from 95 to 85 and bounced a few points up off its 50-day line. The prior uptrend took the stock to new price and RP highs, too. We’re OK taking a stab at it here, but with a stop just under the recent low of 85.
Forescout (FSCT 41) was recommended a couple of weeks ago and it’s continued to drift lower, though buying volume has been larger than selling volume for the most part. The way we’d prefer to play this one is to buy if the stock rallies above 43, and use a stop near 39.
Okta (OKTA 94) was one of the first growth stocks to hit new highs in January and motored up to 87 or so in February before shaking out and consolidating during the next month and a half. Now, though, it looks like the major uptrend is resuming—shares poked to new highs last week, and after a dip during the April 4 selling wave, have immediately snapped back to virgin turf on great volume. We’re OK buying some here or preferably on dips of a couple of points, with a stop near 82.
Workday (WDAY 195) is similar to OKTA—a leader in the two months after the market bottomed, but the stock has wobbled during the past six weeks with a couple of sharp selling waves. Still, the overall damage was limited (200 down to 175 at its worst), and now it’s sniffing around new highs. You could nibble here, but we’re more interested in seeing a powerful breakout above 200 to kick off a new upleg.
SELL IDEAS
We have three sells today—RingCentral (RNG 105), Incyte Corp. (INCY 80) and Netflix (NFLX 354). As always, if you want to give these names a bit more room, you can (NFLX has earnings next Tuesday). But we’re trying to prune some of the more suspect names while sticking with other, stronger situations.
SUGGESTED STOPS
Amarin Corp. (AMRN 19) near 17.9
Array Biopharma (ARRY 24) near 22.1
Atlassian (TEAM 114) near 104.5
Avalara (AVLR 56) near 51.5
Bootbarn (BOOT 30) near 27.9
Chart Industries (GTLS 89) near 84.5
DocuSign (DOCU 55) near 51.5
Entegris (ENTG 40) near 36
Etsy (ETSY 67) near 63.5
Everbridge (EVBG 73) near 68.5
ForeScout (FSCT 41) near 39
iRobot (IRBT 127) near 117
LendingTree (TREE 363) near 325
Match.com (MTCH 56) near 54.5
Omnicell (OMCL 82) near 78
Paycom Software (PAYC 189) near 176
Paylocity (PCTY 87) near 82.5
Planet Fitness (PLNT 72) near 62
ServiceNow (NOW 245) near 227
StoneCo (STNE 35) near 32
Tencent Music (TME 18) near 17.1
Trade Desk (TTD 201) near 181
Veeva Systems (VEEV 136) near 119.5
Woodward (WWD 96) near 92
Workday (WDAY 195) near 179