After last week’s Friday update, the market had a pretty ugly close, but the major indexes have had a decent week to this point, with all posting gains in the 1% range (give or take) as of Friday morning.
Overall, our thoughts haven’t changed much—intermediate- to longer-term, the outlook remains bright, as the trends of the indexes remain up, the majority of sentiment measures remain tame (there are some signs of complacency, but plenty of signs of hesitancy, too) and background indicators like our 7.5% Rule (flashed in early July) bode well when looking out a few months. Individual stocks are also encouraging, with earnings season thus far providing more positives than blowups.
Shorter term, we’d classify the market as positive but not super powerful, with more chopping than trending going on since Independence Day. Plus, a lot of bigger winners this year have stalled out a bit in recent weeks (really since early June)—not a death knell, but buying pressures have eased.
That’s not a reason to be overly cautious by selling your winners or avoiding new buying. It’s simply a reminder not to be complacent (trail your stops and/or take partial profits in winners as opportunities arise), and when buying, to focus on the stocks (look for things that are early stage and have shown excellent recent buying) at decent entry points (some pullbacks or tightness).
All in all, then, you should remain heavily invested, but as always, keep your eyes open as earnings season progresses for both abnormal selling and new leadership. Monday’s Top Ten should have a good number of earnings winners from the past week or two.
BUY IDEAS
Iqvia (IQV) staged a powerful breakout around mid June after boosting its longer-term outlook, then consolidated in a tight range for much of July. But this week’s earnings release brought back the buyers—it’s not going to be a fast mover, but we think IQV is buyable around here with a tight stop (147 or so) and should head higher over time.
Mirati Therapeutics (MRTX)
soared at the start of June and made it to 110 earlier this month before pulling back on mostly tame volume; this morning it tagged its 50-day line near 95. If you’re game, you could start a position here with a tight stop around 88.
Smartsheet (SMAR) looks like one of the newer leaders in the cloud software field, and it broke out from an early-stage base in June after earnings. It’s not at a great entry point here, but SMAR has been resting for a couple of weeks—look for dips to 52 or so, with a stop below the 50-day line (current at 48 and rising).
SELL IDEAS
We have two outright sells today—LendingTree (TREE), which imploded on earnings, and Pulte Homes (PHM), which tripped its stop after a poor earnings reaction. Even after PHM’s recent bounce, we’re OK letting it go.
SUGGESTED STOPS
Advanced Micro (AMD) near 30.5
AGCO (AGCO) near 72.5
Armstrong World (AWI) near 92
Avalara (AVLR) near 73
Baozun (BZUN) near 46.5
Boot Barn (BOOT) near 31.5
Chipotle Mexican Grill (CMG) near 670
Ciena (CIEN) near 41.5
Disney (DIS) near 134
First Solar (FSLR) near 62
Heico (HEI) near 122
Insulet (PODD) near 112.5
Legg Mason (LM) near 36.5
Match.com (MTCH) near 69.5
MercadoLibre (MELI) near 575
Mirati Therapeutics (MRTX) near 88
Paycom Software (PAYC) near 218
PayPal (PYPL) near 112.5
Penumbra (PEN) near 162
Planet Fitness (PLNT) near 70
Sea Ltd. (SE) near 31
ServiceNow (NOW) near 274
Shopify (SHOP) near 282
Sunrun (RUN) near 17.4
Trade Desk (TTD) near 223
Under Armour (UAA) near 25
Veeva Systems (VEEV) near 156
Wix.com (WIX) near 139
Woodward (WWD) near 109
Zscaler (ZS) near 72.5