It’s been a relatively quiet week for the major indexes, which is fine by us given the prior five-week run-up. As we write this morning, the Nasdaq is about flat on the week on below-average volume, while the S&P 500 is off a touch. Lagging small- and mid-cap indexes performed a bit worse.
Overall, nothing has changed with the market’s intermediate- to longer-term outlook—the trends are pointed up, most leading stocks are in good shape and a couple of rare green lights that flashed earlier this month (including our 7.5% Rule, which we wrote about last week) bode well for the bull market when looking months down the road.
Shorter term, it’s still a toss-up, partly due to earnings season, but also due to sentiment—while intermediate-term measures (AAII survey, money flows) still show a lack of enthusiasm, near-term stuff like put-call ratios and volatility are a bit complacent.
To be clear, we’re not predicting a good-sized correction or shakeout, but with earnings season revving up, it’s best to take things on a stock-by-stock basis—some names have been under very strong accumulation and look like good buys here or (preferably) on dips, but others have had huge runs over the past month or two (or three) and could easily correct, especially if we see some continued rotation in the days ahead.
Still, we don’t want to harp on the potential negatives, some of which always exist. Picking your entry points does make sense, most of the evidence from the major indexes and individual stocks remains bullish, so you should remain constructive.
BUY IDEAS
Ciena (CIEN) has been a hard pony to ride this year, with lots of sharp ups and downs. However, after gapping up strongly on earnings in early June, shares have built a tame, controlled six-week launching pad. A powerful move above 45 would be intriguing—you could wait for that to hop onboard, or if you’re aggressive, nibble here with a stop near 41.
It’s only been three weeks since we wrote about Kratos (KTOS), and the stock has basically marked time since then. But we think it’s setting up for another move—the breakout in early May effectively broke the stock out of an 18-month range, and barring a complete market meltdown, we’d expect it to find support in the 21 to 21.5 area. We’re OK nabbing some shares here or on dips.
Match.com (MTCH) has been a bit choppy in recent months, but hasn’t done anything wrong (it’s basically held its 50-day line all year) and now looks to be getting going again—shares have lifted to new highs on solid volume this week, breaking free from a two-month rest. Nabbing some here or on a dip of a point or two seems fine, with a stop around 69.
SELL IDEAS
Gold stocks look great, but if you bought some a few weeks ago and have decent gains, consider booking partial profits here, then holding most of your shares with a looser stop (start around breakeven if you have a good profit) and see if this group move can go on a while.
Same goes for PagSeguro (PAGS) if you have a good profit—shares have gone vertical, which is probably a good longer-term sign but near term, we’d probably take some chips off the table.
As for outright sells, Amarin (AMRN) tripped our loss limit after announcing a good-sized secondary offering, so that will be sold. And, in the interest of pruning the list, we might advise selling a couple others on Monday, but we’ll see what things look like then.
SUGGESTED STOPS
Advanced Micro (AMD) near 30
Amarin (AMRN) near 18.5
Armstrong World (AWI) near 91
Avalara (AVLR) near 71.5
Boot Barn (BOOT) near 31
Chipotle Mexican Grill (CMG) near 648
Ciena (CIEN) near 41
Disney (DIS) near 133
First Solar (FSLR) near 61.5
Heico (HEI) near 120
Innovative Industrial Properties (IIPR) near 110**
Legg Mason (LM) near 36
LendingTree (TREE) near 385
Match.com (MTCH) near 69
MercadoLibre (MELI) near 570
Paycom Software (PAYC) near 216
PayPal (PYPL) near 111.5
Penumbra (PEN) near 158
Planet Fitness (PLNT) near 70
Pulte Homes (PHM) near 31.5
Sea Ltd. (SE) near 30
ServiceNow (NOW) near 271
Shopify (SHOP) near 275
Trade Desk (TTD) near 220
Under Armour (UAA) near 25
Veeva Systems (VEEV) near 154.5
Wix.com (WIX) near 136.5
Woodward (WWD) near 108
Zscaler (ZS) near 71.5
**We goofed by including IIPR in our Hold section a couple of weeks back (misread the chart by a day), as the stock didn’t trade within our buy range. However, we’ve heard from many subscribers that they did take a position—thus, we’ll continue to provide advice on it for those that own it.