NOTE: I’m flying out for a long weekend of R&R so I’m sending out Friday’s normal update a day early.
It’s been a very interesting week to this point, with another round of heavy selling (especially in growth stocks) as a new uncertainty arose (impeachment), bringing many indexes back down to intermediate-term support. But we’ve seen a decent rebound since, both for the indexes and many potentially leading stocks, which keeps the trend pointed up.
A strong close to the week would be encouraging, raising the odds of this being another news-driven shakeout; we’ll be looking for some big-volume support weeks during our weekend studies. But at this point, nothing has really changed with our view.
When it comes to the overall market, most of the evidence is positive (trends, broad market, sentiment), so we still want to at least lean to the bull side of things. That said, when it comes to individual stocks, not a lot of money is being made out there—it’s something of a meat grinder environment, with seemingly every stock that has a few good days quickly encountering sellers afterwards.
That said, we’re staying flexible—a couple of good days (not just big gains for the indexes but numerous breakouts from fresher leading stocks) could make all the difference in the world, as we’re still seeing a good number of stocks holding up well. But we have to actually see the buyers step up for more than a few hours (and for some breakouts to stick) before extending our line.
Overall, then, we’re continuing to give our strong and resilient stocks a chance to wiggle around and are OK doing some buying here and there. But new positions should probably be kept on the small side, and getting solid entry points (on pullbacks or tightness) and holding some cash on the sideline is advised. Our Market Monitor is likely to stay on level 6 in Monday’s issue.
BUY IDEAS
Floor & Décor (FND), which was our Top Pick a couple of weeks back, has lifted nicely out of its tight area on solid volume, registering year-long highs. The trick here is that breakouts haven’t been “sticking” of late, so a reversal is possible. But still, we like the setup and the fact that FND has been base-building for months (i.e., it hasn’t been a hot stock). If you don’t own any, you could start a small position here with a stop around 46.
We’re very impressed with Insulet (PODD)—it got whacked along with all growth stocks earlier this month (and after a good-sized dilutive convertible bond offering), but held its 50-day and has zoomed all the way back to its highs on increasing volume. Pullbacks are likely given the environment, so if you want in, aim for a dip below 160 with a stop near 140.
Sanderson Farms (SAFM) might not be a sexy story, but earnings estimates are through the roof for next year and the stock has tightened up near the top of its four-month base. Nibbling here or on dips (stop around 143) is one idea, or look for a decisive breakout above 158 to buy (stop near 146).
SELL IDEAS
JD.com (JD) is our lone sell this week, as it tripped our stop and will be listed as a sell. If you still own some and want to give it a bit of wiggle room after its bounce, that’s fine, but a tight stop makes sense.
SUGGESTED STOPS
Agnico Eagle (AEM) near 55.9
Arconic (ARNC) near 25
Carvana (CVNA) near 68
Casey’s General Stores (CASY) near 157.5
Elastic (ESTC) near 82
Fastly (FSLY) near 23.9
Generac (GNRC) near 74.5
Insulet (PODD) near 140
Lattice Semi (LSCC) near 18.2
Lithia Motors (LAD) near 126
LivePerson (LPSN) near 36
Neurocrine Bio (NBIX) near 92.5
New Oriental Education (EDU) near 103.5
Novocure (NVCR) near 72.5
PagSeguro (PAGS) near 44
Sherwin Williams (SHW) near 515
Synopsys (SNPS) near 132.5
Take-Two Interactive (TTWO) near 123
Teradyne (TER) near 53
TransDigm (TDG) near 503
Twitter (TWTR) near 40.5
Western Digital (WDC) near 54.5