Note: The market is closed today for the Good Friday holiday, but we’re still sending this update and will be back with you Monday evening, as usual, with another issue of Cabot Top Ten Trader.
As for the market, it was a quiet week for the major indexes, with the S&P 500 and Nasdaq both nearly unchanged, but that hid another round of rotation under the surface, with sectors like transports and financials rising solidly while small-cap indexes were down 0.75% and many technology- and medical-related growth stocks took hits.
From a top-down perspective, the market is still looking good, as both the intermediate- and longer-term trends are up and the vast majority of stocks (and leading stocks) are still in uptrends. In the short term, we do think there’s increased risk of some market wobbles for a few reasons (recent round-number resistance at Nasdaq 8,000, earnings season is ramping up, etc.), but overall, it’s still a bull market.
The real question comes with many technology-centric leading stocks—which make up a good chunk of the market’s leadership—that are again down to intermediate-term support. These names, which led the market off the market bottom, have now suffered three mini-selling waves since March 22.
We’ll be watching things closely going forward. These three selling waves could prove to be a normal digestion after some big January-February runs and pave the way for the next upleg … or they could be signs of distribution that will lead to deeper, longer corrections in these stocks.
All told, we’re still taking things on a stock-by-stock basis. More than a few stocks did crack this week (see our sell list below), but the majority remain in good shape, with even most that have taken hits still above key support. As long as names hold up, we advise giving them a chance to resume their major uptrends—but it’s also vital to honor your stops and loss limits should the recent selling continue and spread to other areas of the market.
On the buy side, we’re seeing some opportunities both on strength (in names that have benefited from the market’s rotation—more of which will likely be in next week’s issue) and on pullbacks (growth stocks down to support), though for many we’d probably start small given the action in leaders and the fact that many have earnings coming within two to four weeks.
BUY IDEAS
CoStar Group (CSGP 482) isn’t sexy, but it’s growing nicely and the stock acts very much “under control” as it’s crawled higher since its big earnings gap in late February. We’re OK buying some here with a stop around 450, with the idea of adding more on a push north of 500.
Don’t get us wrong, buying here is risky, as Invitae (NVTA 23) has pulled back sharply with all medical stocks, but found support at its 50-day line on Thursday and bounced decently. Given that this is the stock’s first dip to the 50-day line since breaking out of a multi-year base in February, the odds favor it leading to higher prices. If you’re game, you can start small with a very loose stop (19 or so) and see how it goes.
Woodward (WWD 101) consolidated in a tightening range for many weeks, and as the rotation has brought money into its sector, the stock has leapt off its 50-day line to new highs on strong volume. Earnings are due out April 29, which is a risk, but we’re OK starting a position around here with a stop under 95 and seeing what comes on earnings.
SELL IDEAS
This week’s selling cracked a bunch of stocks that were acting iffy and/or caused some names to trip their stops. As always, if you want to sell some and hold the rest to see how things play out from here, that’s an option, but we’ll list the following as sells in Monday’s issue:
Amarin Corp. (AMRN 18)
Array Biopharma (ARRY 22)
Atlassian (TEAM 102)
DocuSign (DOCU 53)
Etsy (ETSY 63)
Everbridge (EVBG 67)
ForeScout (FSCT 38)
Omnicell (OMCL 71)
Sleep Number (SNBR 39)
StoneCo (STNE 27)
TAL Education (TAL 34)
Tandem Diabetes (TNDM 54)
Wheaton Precious Metals (WPM 22)
SUGGESTED STOPS
Avalara (AVLR 55) near 51.5
Bootbarn (BOOT 30) near 27.9
Chart Industries (GTLS 87) near 84.5
Entegris (ENTG 41) near 37
Ionis Pharmaceuticals (IONS 73) near 70.5
iRobot (IRBT 129) near 118
LendingTree (TREE 367) near 329
Match.com (MTCH 59) near 55
Paycom Software (PAYC 189) near 178
Paylocity (PCTY 89) near 83.5
Planet Fitness (PLNT 73) near 62.5
ServiceNow (NOW 237) near 227
SS&C Tech (SSNC 64) near 60.5
Tencent Music (TME 18) near 17.1
Trade Desk (TTD 199) near 182
Veeva Systems (VEEV 128) near 120
Woodward (WWD 101) near 94.5
Workday (WDAY 188) near 179
Zendesk (ZEN 81) near 76.5
Zscaler (ZS 63) near 57