It’s been another decent week for the major indexes—the S&P 500 and Nasdaq are up in the 1.25% range as of early Friday, with both sitting at all-time highs. The broad market wasn’t quite as strong (up 0.6% as we write this) but all major indexes remain north of their intermediate-term moving averages.
Moreover, we’d say the evidence concerning individual stocks and potential leaders has taken a step forward this week. First, we’re seeing a few more breakouts from stocks that had been set up nicely into earnings. And second, stocks that have broken out on earnings or otherwise gapped up on their reports have generally held those gains, with pullbacks looking normal so far.
The same could be said about the major indexes, which have run into resistance (prior highs) but, thus far, have held firm. Actually, we’re impressed that the market has been relatively calm and collected this week despite its prior run, a huge batch of earnings and two big news events (Fed, jobs).
Of course, few stocks are really running away on the upside, and there are still a decent number of blowups out there. And we’re always watching recent breakouts to see if they stick. Thus, it’s not suddenly 1999 out there.
Still, we’ll take it. Bigger picture, the evidence continues to suggest the next major move is up for stocks, and the past week or two adds to the possibility that such an upmove is getting going here. We don’t advise anything dramatic, but putting some sidelined money to work in (a) big-volume breakouts or (b) pullbacks after persistent runs, makes sense. We’re likely to nudge our Market Monitor up a notch on Monday.
BUY IDEAS
Casey’s General Stores (CASY) broke out of a very long consolidation back in June and had a solid advance through mid-August (145 after the gap to 172). Then came a very reasonable pullback and consolidation for two and a half months, and this week’s earnings move increases the odds that the upmove is resuming. There’s still some overhead in the low 170s, so you could start small here (stop near 161) and add if the stock pushes up another few points.
Fastenal (FAST) broke out decisively in early October and followed through nicely after that, and its pullback this week brought the stock back into our buy range from a couple of weeks ago. We’re OK picking up shares in the 35 to 36 area and think FAST could be a solid cyclical-oriented winner should the market remain healthy.
Garmin (GRMN) started building its launching pad back in early April and, in recent weeks, tightened up in the mid/upper 80s. And now the stock has decisively broken out on earnings. Yes, it could pull back, but we’re OK starting small here or on dips of a couple of points—it looks ready for a solid run.
MasTec (MTZ) looked like it could be done for, slipping below its 50-day line on volume yesterday. But this morning (it’s still early) the stock has catapulted higher. It’s probably going to be fidgety today, but if the stock can close around 66 or higher, it would be a great sign the recent weakness was a shakeout. If you enter, a stop a bit below today’s low (62-ish) makes sense.
SELL IDEAS
SAIA Inc. (SAIA) and Western Digital (WDC) tanked on earnings; both are sells.
Taylor Morrison (TMHC) also got hit on earnings, and while it’s not a disaster here, it’s not looking nearly as good as most of its homebuilder peers. We’re exiting.
Nike (NKE) looked great a few weeks ago, breaking out from a big base, but the past week or so has changed the outlook—the stock sank sharply five days in a row on huge volume, and while it’s hanging around its 50-day line, we think there will be better places for your money. We’re selling.
Crocs (CROX) is still fine overall, but after a quick 10%-plus run from our recommendation, a big share offering has caused some outsized selling. We’re OK taking a few chips off the table and letting the rest ride.
SUGGESTED STOPS
Acadia Pharm (ACAD) near 38.5
AJ Gallagher (AJG) near 88.5
Apollo Global (APO) near 38.5
Boot Barn (BOOT) near 34
Burlington Stores (BURL) near 188
Casey’s General Stores (CASY) near 161
DR Horton (DHI) near 50.5
Edwards Lifesciences (EW) near 223
Entegris (ENTG) near 45.5
Generac (GNRC) near 83
Insulet (PODD) near 143
JB Hunt (JBHT) near 109
KLA Corp. (KLAC) near 154
Lam Research (LRCX) near 245
Meritage (MTH) near 68
Martin Marietta (MLM) near 257
MasTec (MTZ) near 61
New Oriental Education (EDU) near 111
RH (RH) near 164
Sherwin Williams (SHW) near 539
SolarEdge (SEDG) near 81
Teradyne (TER) near 57
Target (TGT) near 102.5
Trex (TREX) near 84.5
Weight Watchers (WW) near 33
ZTO Express (ZTO) near 20.6