Last week’s encouraging breakout by the major indexes turned into this week’s retreat, although this morning’s jobs-related rally is good to see. Overall, of the five major indexes we track regularly, one is looking fine (Nasdaq), but the other four have made hardly any progress during the past seven weeks.
Still, we’re just going with the evidence, as usual. For most stocks, it’s fair to say the shorter-term trend is neutral, but the intermediate-term trend is still tilted up and the longer-term trend is clearly higher.
On the optimistic side, one main positive we’re seeing lately is that almost all of the stocks that have gapped higher on earnings have held those gains. Granted, not many have continued much higher, but it’s not like sellers are swarming to them after the rise. That’s a positive.
Plus, we’re seeing many growth-oriented stocks act better, some react well to earnings and a bunch begin to set up ahead of their own earnings reports in the days ahead. Should the market get going, there should be plenty of fresh meat for us to sink our teeth into.
One last point: We’re definitely seeing more strength and resilience among bigger-cap names, while small-cap issues consolidate. That doesn’t mean you should avoid all small- or mid-cap stocks, but if choosing between two stocks you like, it might pay to go with the larger-cap on in this environment.
All told, we’re content to keep our Market Monitor at a level 7 (out of 10)—we’re certainly more bullish than not because the evidence is mostly bullish. But we do think it’s best to be more selective on the buy side until most indexes get going, and on the sell side, we’re continuing to tighten our stops in case the sellers take control.
BUY IDEAS
Freeport-McMoRan (FCX 16) has been tossed around on a day-to-day basis on earnings, movements in copper prices and updates surrounding its Indonesian mine (it’s still looking for export approval there). Through it all, though, the stock remains perched near new price and relative performance (RP) highs. We’re OK with a buy around here and a stop just below 15.
Glaukos (GKOS 43) has broken out nicely from its base on excellent volume and continued higher in recent days. This remains a thinly-traded issue, and earnings are still set to be released in the coming weeks. But if you don’t own any, a small position bought on dips toward 41 would be tempting, with a stop around 37.
Many energy stocks look rough (three are being sold this week; see below), but we like the look of the chart on Patterson-UTI Energy (PTEN 28) a lot. The stock has reacted well to a share offering and set up a nice two-month base. With earnings out February 9, we’d prefer to wait for a push above 29.5 to enter, with a stop around 26.5.
Thor Industries (THO 105) gapped up on earnings in late November and rallied into December, but like so many stocks, sectors and indexes, it’s since marked time. The good news is that shares found good-volume support at their 50-day line last week and are tightening up beautifully this week. You could nibble here or just wait for a push above 106.5 to enter. A stop at 98.5 should keep risk in check.
SELL IDEAS
We have four sells this week: Atwater Oceanics (ATW 13), Oil States International (OIS 40), TD Ameritrade (AMTD 42) and Transocean (RIG 14).
In addition, we’ve tightened a bunch of stops as we trail our exit points higher with most of our recommendations.
SUGGESTED STOPS
Applied Materials (AMAT 35) near 32.5
Berry Plastics (BERY 50) near 48.5
Cavium (CAVM 67) near 62.5
Charles Schwab (SCHW 40) near 37
Dave & Buster’s (PLAY 54) near 52
DeVry (DV 32) near 31
Eagle Materials (EXP 106) near 99
Freeport-McMoRan (FCX 16) near 14.8
Grand Canyon Education (LOPE 58) near 56
Greenbrier (GBX 45) near 41.5
HD Supply (HDS 43) near 40.5
Halliburton (HAL 57) near 54.5
Hancock Holding (HBHC 46) near 42
HealthEquity (HQY 47) near 43.5
MGM Resorts (MGM 29) near 28
MRC Global (MRC 21) near 20
Nvidia (NVDA 115) near 99
Oshkosh (OSK 69) near 67
Patterson-UTI Energy (PTEN 28) near 26.5
PDC Energy (PDCE 74) near 72
Quanta Services (PWR 37) near 34
SVB Financial (SIVB 174) near 163
Signature Bank (SBNY 156) near 150
Square (SQ 14) near 13.5
Take-Two Interactive (TTWO 55) near 50.5
Tesaro (TSRO 159) near 140
Texas Capital Bancshares (TCBI 85) near 78
Thor Industries (THO 105) near 98.5
Univar (UNVR 29) near 27
U.S. Silica (SLCA 58) near 53.5
Western Alliance Bancorp (WAL 50) near 47
Western Digital (WDC 80) near 71
XPO Logistics (XPO 46) near 42