The market’s had another rotational week—the big-cap indexes have done OK (S&P 500 and Nasdaq up around 1%), small-cap indexes have done even better (up nearly 2%), but growth stocks have suffered another round of heavy selling, with many falling to new correction lows.
All told, our general viewpoint hasn’t really changed. In total, this remains a choppy, meat grinder-type environment where not a lot of money is being made. Yes, some areas look OK, but very few stocks are in solid uptrends (most buying is in stocks recovering from a bad couple of weeks) and we’re seeing far more names breaking down than breaking out.
On a positive note, we do think the evidence for the overall market has improved a bit, as the major indexes have pushed back toward their highs. And we still see a pretty decent big-picture setup developing out there—the grinding correction in the indexes and most stocks, the negative investor sentiment out there and (believe it or not) the decent amount of setups among individual stocks all tells us that if the buyers show up, a sustained run could finally emerge.
Thus, it’s good to be ready, and we don’t think you should be 100% on the sideline or anything like that; buying a little of some potential leaders on dips still makes sense. However, until the market and (more important) individual stocks and sectors get going for more than a few days at a time, it’s best to be choosy on the buy side and hold plenty of cash. Less is more until proven otherwise, at least if your game plan is to hold something for more than a few weeks.
BUY IDEAS
Frankly, we don’t see many decent-looking entry points right now, as stocks seem divided into two groups—those that are sputtering and have suffered some big-volume selling, and those that have recently popped higher, which is good, but we’d prefer to enter on dips given the market environment.
For instance, Jabil (JBL) still looks great, with another round of good-volume buying pushing it to new highs earlier this week. A dip of a point or so (the 25-day line is at 34.3 and rising fast) would be tempting for an entry.
MasTec (MTZ) bounced off its 50-day line earlier this month and has stretched to new highs on a few days of solid volume. A pullback of two or three points (the 50-day line is at 63.4 and rising) would look tasty.
And Medicines Co. (MDCO) has accelerated higher (albeit on so-so volume), which is great, but in this environment, you should probably entertain a buy only on dips of three or four points from here.
SELL IDEAS
On the upside, don’t forget to take some off the table if you own one of the rare stocks that’s had a solid run. Homebuilders, for instance, look good, but have also been trending higher for a few weeks, so letting some go of KB Home (KBH) or Meritage (MTH) if you have a solid profit makes sense, while letting the rest run.
As for outright sells, we have two today—Coupa Software (COUP) and Floor & Décor (FND)—but we’ve updated our stops below and could throw some other things overboard on Monday if the sellers dig in.
SUGGESTED STOPS
Acadia Pharm (ACAD) near 37
AJ Gallagher (AJG) near 85.5
Apollo Global (APO) near 36.5
Boot Barn (BOOT) near 33
Casey’s General Stores (CASY) near 158
Chubb (CB) near 152
Edwards Lifesciences (EW) near 218
Generac (GNRC) near 78.5
Insulet (PODD) near 143
JB Hunt (JBHT) near 107
KLA Corp. (KLAC) near 149
Lam Research (LRCX) near 220
Martin Marietta (MLM) near 255
Medpace (MEDP) near 75
New Oriental Education (EDU) near 106.5
Proofpoint (PFPT) near 118
Sherwin Williams (SHW) near 527
Teradyne (TER) near 55
Weight Watchers (WW) near 32
Western Digital (WDC) near 55
ZTO Express (ZTO) near 19.2