The market was mostly quiet (though also mostly positive) for the first four days of the week, though volatility picked up today after some additional tariffs from China and Fed Chair Jerome Powell’s speech in Wyoming. As we write this, stocks are down today but still generally up on the week, with the S&P 500 and Nasdaq in the green by a bit less than 1% since last Friday.
Despite all the moves of the past couple of weeks and today’s headlines, nothing has really changed with our overall view. Looking at the primary evidence, the market’s intermediate-term trend has yet to turn positive—all major indexes continue to flop around below their 50-day lines and have “only” recouped about half of their August declines.
On the flip side, we’re still encouraged by the resilience of many leading stocks, especially some recent earnings winners that have not only held their gains during the past couple of weeks but shot ahead to new highs.
And, digging into secondary evidence, it’s a positive that sentiment is very negative right now, and we like the fact that the number of stocks hitting new lows on both exchanges have dried up nicely this week. It’s too soon to conclude the broad market has turned healthy, but it’s a good first step.
Put it together, and we’re sticking with what we’ve been writing for the past couple of weeks: Until proven otherwise, the market remains in a correction/consolidation, so we advise a cautious stance, with limited/small new buying and holding some cash, though it’s also best to give your strong, profitable names a chance to continue to hold up.
From here, the game plan is simple—if the market and individual stocks kick into gear, we’ll advise gradually extending your line. Should we continue to chop around, we’ll stick with our current stance. And, of course, if we see another leg down, we’ll be pruning our losers and laggards.
Right now, though, we think playing a little defense and staying flexible is your best bet.
BUY IDEAS
PagSeguro (PAGS) came through its earnings report in fine shape (popped to new highs and has held those gains since). It’s a touch extended here, but any pullback to or below 50 would be tempting, with a stop around 44 or so (near the fast-rising 50-day line).
Pinterest (PINS) is one of many growth stocks that gapped on earnings in the midst of the market’s early-August plunge, held those gains during the next couple of weeks and is now stretching its legs, tagging new highs on Wednesday. A small position on dips under 35 and using a loose stop (30 or so) seems like a good risk-reward.
These are higher risk, but we see quite a few set-ups among stocks that are reporting earnings during the next couple of weeks—Coupa (COUP) above 148 (reports September 3), Okta (OKTA) above 141 (reports next Wednesday), Anaplan (PLAN) above 60.5 (reports next Tuesday) and Smartsheet (SMAR) above 56 (reports September 4) are all ideas to either watch for future breakouts—or, if you’re aggressive, to nibble around here and see what their reports bring.
SELL IDEAS
First off, if you happen to own a shooting star or two—something like Novocure (NVCR) or Enphase (ENPH)—don’t forget to take some partial profits on the way up, especially given the fact that the market is still iffy.
As for outright sells we have two today: Sea Ltd. (SE) and Tempur Sealy (TPX), though we’ll have our updated list in Monday’s issue, as always.
SUGGESTED STOPS
Arrowhead Pharm (ARWR) near 28
Avalara (AVLR) near 78
Boston Beer (SAM) near 380
Chipotle Mexican Grill (CMG) near 685
Epam Systems (EPAM) near 181
Generac (GNRC) near 68.5
Guardant Health (GH) near 90.5
Heico (HEI) near 131
Insulet (PODD) near 128
Iqvia Holdings (IQV) near 151
Kirkland Lake Gold (KL) near 41.5
Lithia Motors (LAD) near 122
Match.com (MTCH) near 77
Paycom Software (PAYC) near 225
Shopify (SHOP) near 320
SolarEdge (SEDG) near 73
Smartsheet (SMAR) near 46
SunPower (SPWR) near 12
SurveyMonkey (SVMK) near 16.9
Teradyne (TER) near 49.5
Trade Desk (TTD) near 235
Twitter (TWTR) near 39
Wheaton Precious Metals (WPM) near 25.5