It’s been a decent week for the market, with the S&P 500 and Nasdaq each up modestly. But as has been the case in recent weeks, it really depends on where you look—this week was another one of rotation on an almost daily basis.
Transportation stocks, for instance, which have been in favor in recent weeks, are down around 1.5%, while chip stocks are solidly negative after Intel’s decline today. That said, many growth stocks that had been wobbling in recent weeks perked up with a few near breakouts.
All in all, though, not much has changed—the intermediate- and longer-term trends of the major indexes and most stocks are still pointed up, though there are a couple of flies in the ointment (relatively few stocks hitting new highs, lagging small-cap indexes) and rotation remains intense on a week-to-week basis, with earnings season likely to keep that going.
Overall, then, we’re still bullish, but it’s important to pick your spots and your entry points carefully, especially given that the major indexes are sticking a bit up in the air right now—the Nasdaq is nearly 400 points above its 50-day line and hasn’t pulled back all month. To be clear, strength is a good thing, but for new buying you want stocks that have shown some big-volume buying recently and ideally are pulling back (or shaking out) into an area of support.
Another point we want to highlight as earnings season pushes on: We’ve seen a couple of blowups this week (IRBT and XLNX, to name two), and in these cases, you should sell at least some of your position (if not all)—yes, the stock can bounce, but huge earnings-related breakdowns, especially when they come after big advances, means the odds strongly favor at least some base-building activity going forward, if not something worse.
If you want to hold some shares and try to find a better exit point, that’s fine, but we’d avoid “holding and hoping” the entire position with names that clearly get wiped out on earnings, dipping below key support on giant volume.
Lastly, as for how to avoid these blowups, you really can’t unless you sell all your shares ahead of earnings—but doing that is going to cut your profits short in many strong names. The key isn’t guessing but to have a plan ahead of time—holding through a report is fine, as is selling some ahead of time, but whatever you choose, it’s best to be consistent with your stocks. Over time, if you’re invested in strong names in uptrending markets, you’ll end up with more earnings winners than losers.
Broadcom (AVGO 307) isn’t the fastest mover, but it reacted well to earnings in mid March and rose above 320 before finally pulling back in recent days. This dip toward the 25-day line (now near 308) looks buyable, with a stop near the 50-day line around 290.
Huazhu Group (HTHT 43) saw its uptrend accelerate from early March (around 32) to the end of March (up to 45), and the stock has consolidated nicely in April, including a nice shakeout last week. It could rest for a bit longer, but we’re OK taking a stab at it here or on dips of a point or two, with a stop near 39.
Match.com (MTCH 62) has lifted to new highs on solid (not spectacular) volume after resting for the better part of two months. Earnings are due out May 8, but if you’re game, you could nibble here with a tight stop around 57, and then see what earnings bring.
Sea Ltd. (SE 24) has etched a really nice-looking consolidation in recent weeks and is testing resistance near 25. It can be a wild mover, but any decisive move north of 25 looks buyable, albeit with a stop around 22.5.
We have three outright sells today: iRobot (IRBT 129), Tencent Music (TME 18) and Xilinx (XLNX 111). We could have more on the chopping block come Monday as some are very close to their stops, but we’ll see how it goes.
Amphenol (APH 99) near 97
Avalara (AVLR 55) near 51.5
Bootbarn (BOOT 30) near 27.9
Cabot Microelectronics (CCMP 119) near 114
Delta Air (DAL 56) near 54
Epam Systems (EPAM 176) near 162
Entegris (ENTG 41) near 37
Ionis Pharmaceuticals (IONS 73) near 70.5
LendingTree (TREE 367) near 333
Lennox (LII 269) near 250
KeySight (KEYS 85) near 83
Match.com (MTCH 59) near 56.5
MercadoLibre (MELI 490) near 450
Paycom Software (PAYC 189) near 181
Paylocity (PCTY 89) near 85
Planet Fitness (PLNT 73) near 63.5
ProPetro (PUMP 23) near 20.7
ServiceNow (NOW 237) near 235
Starbucks (SBUX 75) near 71.5
SS&C Tech (SSNC 64) near 61.5
Trade Desk (TTD 199) near 186
Veeva Systems (VEEV 128) near 122
Woodward (WWD 101) near 96
Workday (WDAY 188) near 179
Yext (YEXT 20) near 19.5
Zendesk (ZEN 81) near 77.5
Zscaler (ZS 63) near 58.5