First off, a quick note: Next week’s Top Ten issue will go out as scheduled (Monday, July 1), but due to the July 4 holiday, there’s unlikely to be a Movers & Shakers update next Friday (our offices will be closed). That said, feel free to email me (mike@cabotwealth.com) if you have questions, as I’ll be online Monday-Wednesday and probably a bit on Friday, too.
Onto the market, the major indexes had a relatively quiet week ahead of the G20 summit, which is (mostly) taking place over the weekend. As we write this, the S&P 500 and Nasdaq are down about 0.7% on the week, which is more than reasonable given the recent gains. In our minds, this makes it four straight constructive weeks following the market low.
Don’t get us wrong, there are some flies in the ointment, including the lagging broad market and some divergences among the indexes. But from a top-down perspective, most of the evidence (intermediate- and longer-term trends pointed up) is positive, so we continue to lean bullish.
The thing that caught our attention this week (and late last week) was some distribution among leading growth stocks, including a couple that flashed abnormal intermediate-term action. It’s not the end of the world, but there are more charts showing suspicious action (lots of volatility after long advances, strong selling volume and weak buying volume, etc.) now than we’ve seen in a couple of months.
That doesn’t mean you should make wholesale changes, but it’s important to take things on a stock-by-stock basis. Be sure to honor your stops and loss limits and to not be afraid to book some partial profits on extended names that are beginning to wobble. And on the buy side, aim for “fresher” names that have shown great accumulation of late and are holding up well.
Looking ahead, we’ll see what (if anything) comes out of the G20 meeting—if the evidence changes (a big selloff that cracks the nascent uptrend, or conversely, a powerful rally that produces a bunch of new breakouts), then we’ll change our stance. But with most of the evidence currently pointed up, you should continue to lean bullish.
BUY IDEAS
First Solar (FSLR) hasn’t been a hot stock, but that’s probably a good thing in the current environment. Shares basically held their 50-day line in May, and after a quick move to new highs earlier this month, chopped around for the past couple of weeks. But yesterday, FLSR pushed to new highs on solid volume; we think it’s a solid reward-to-risk situation here. We’re OK taking a stab at it with a stop around 60.5.
Smartsheet (SMAR) had a big run from the start of the year through mid-March, built a solid base for over two months and then raced ahead soon after the market’s early-June low, briefly tagging new highs above 50. Now it’s pulled back a bit on tame volume and is still above its moving averages. We’re OK starting a position here or on dips toward 46, with a stop just under 42.
SELL IDEAS
If you own some Planet Fitness (PLNT), we’d probably sell some (if you have a profit) or all (a loss)—the stock’s had a good run, but the action in recent days looks abnormal on an intermediate-term basis.
We’d also consider booking partial profits in some of the software names that have had good runs this year and are beginning to show some distribution. Veeva Systems (VEEV) are Shopify (SHOP) are two examples—neither has truly broken down, but after huge runs with no weakness for months, they’re beginning to see some big-volume selling. Not necessarily the end of the world, but it’s a yellow flag.
As for outright sells this week, we have five:
Ascendis Pharma (ASND)
Five Below (FIVE)
GW Pharmaceuticals (GWPH)
LPL Financial (LPLA)
Zoom Communications (ZM)
SUGGESTED STOPS
Advanced Micro (AMD) near 28.9
Avalara (AVLR) near 64.5
Chipotle Mexican Grill (CMG) near 640
Ciena (CIEN) near 39.9
CoStar Group (CSGP) near 513
Disney (DIS) near 130
First Solar (FSLR) near 60.5
Harris (HRS) near 182
Heico (HEI) near 116
Legg Mason (LM) near 35.5
LendingTree (TREE) near 379
Match.com (MTCH) near 65
MercadoLibre (MELI) near 550
MongoDB (MDB) near 143
Paycom Software (PAYC) near 205
PayPal (PYPL) near 109
Planet Fitness (PLNT) near 70
Pulte Homes (PHM) near 30.5
Sea Ltd. (SE) near 28
ServiceNow (NOW) near 261
Shopify (SHOP) near 260
Starbucks (SBUX) near 80
Trade Desk (TTD) near 216
Veeva Systems (VEEV) near 150
VeriSign (VRSN) near 195
Wix.com (WIX) near 132
Woodward (WWD) near 107
Zscaler (ZS) near 69.5