First off, a little housekeeping to start: Because of Thanksgiving and our publishing schedule, the next week or so will have some changes from the usual course of business.
Next Monday, November 25: Top Ten issue – as usual
Next Friday, November 29: No Movers & Shakers update (Happy Thanksgiving!)
The following Monday, December 2: No Top Ten issue (one of our two weeks off per year)—however, I will try to pump out a quick update (with updated stops) that day just to keep in touch.
As always, you can email with any questions at any time at mike@cabotwealth.com.
Onto the market, it’s been relatively quiet for the major indexes—the S&P 500 and Nasdaq aren’t far from unchanged on the week as we write this, though we think it’s fair to say selling pressures have finally ticked higher in recent days.
For instance, small- and mid-cap indexes (better measures of the broad market) are both down in the 1% range on the week, lagging their larger-cap brethren. And more than that, we’ve seen a good number of individual stocks start to pull in with fewer hitting new highs. While we wouldn’t read too much into one day’s trading, yesterday’s number of new highs on the Nasdaq was the fewest since mid-October.
Given the straight-up run for six weeks and a few short-term signs of complacency, a bit more uncomfortableness is certainly possible; we’re open to the chance of a passing shower of sorts. And that’s probably a good reason to favor buying on weakness (instead of strength) and to be a bit choosy on the buy side.
That said, very little we’ve seen so far looks threatening from an intermediate- to longer-term perspective; few names have broken key support or shown iffy action (and those have generally been names that have run for a few months), compared to many that appear to be approaching solid entry points. The same goes for the major indexes—while the S&P 600 SmallCap is a bit sloppy, even it remains about 1.5% above its 50-day line, with other indexes better than that.
Obviously, we won’t rule anything out, and it’s always possible something pops up that leads to the buyers retreating back into their cave. But the big-picture evidence—price, volume and trend action of the major indexes and leading stocks, both growth and cyclical—continues to look very promising. Thus, we’re sticking with a bullish posture, and think further pullbacks or consolidation should prove buyable.
BUY IDEAS
Murphy USA (MUSA) doesn’t have the sexiest story, but the huge breakout on Halloween has held, with the stock nosing higher since. If you don’t own any, we’re OK starting a position here or preferably on dips of a few points, with a stop in the 108 area.
Reliance Steel (RS) soared out of a great-looking flat base in mid-October, ran as high as 120, had two modest-volume down weeks and is now perking up again on heavier volume. We’re game taking a stab at it here, albeit with a tight (percentage-wise) stop around 110.
Synnex (SNX) has tightened up around the 120 area for the past four weeks after a solid advance. We’re OK starting a position here or on dips, with a stop a couple of points below the 50-day line (currently around 113.5).
Valero (VLO) had a nice trend knockout-type move this week, sinking from its tight area near 100 to below 95 over a couple of days before snapping back. It might wobble around a bit more, but we’re fine picking up shares around here or on dips, with a stop near 90 or 91.
Lastly, it’s not a buy recommendation, but we got a few questions on InMode (INMD), the super-hot recent IPO that plunged back down to earth yesterday. The action is a red flag, no doubt, but we can’t say it’s broken, either; the stock is actually still above its rising 25-day line (now near 39.2). Bottom line, there’s a chance yesterday’s move was a trend knockout—but in case it wasn’t, we’d be using a stop in the upper 30s (we set ours at 38.5 but feel free to adjust that a few dimes if you want). The thinking here is that if yesterday was a brief shakeout, INMD should recover quickly. If it wasn’t, there will be follow-on selling. Holding for now, but with a reasonably tight stop.
SELL IDEAS
On the sell side, both Pinduoduo (PDD) and ZTO Express (ZTO) have broken down on earnings and are being sold. As always, you can sell some/hold some if you want, but the goal is to make sure a bad situation doesn’t get much worse, so we’d take at least some action if you own either one.
We’re also going to let go of both KLA Corp. (KLAC) and Teradyne (TER)—both stocks have come under some pressure, but just as important, both have been running higher for a few months and could easily bounce around and consolidate for a while. We think booking the modest profits make sense.
Lastly, we had a stop on MasTec (MTZ) at 65, and if you got tripped out, that’s fine, just let it be. If you still own some, though, we’d hold here but with a stop around 62, waiting to see if the bizarre financing-related selloff was a short-term selloff or something more sinister.
SUGGESTED STOPS
Acadia Pharm (ACAD) near 41
Allegiant Travel (ALGT) near 160
Apollo Global (APO) near 40
ASML (ASML) near 254
Boot Barn (BOOT) near 36.5
Burlington Stores (BURL) near 196
Crocs (CROX) near 32
Edwards Lifesciences (EW) near 229
Generac (GNRC) near 87
InMode (INMD) near 38.5
Insulet (PODD) near 158
JB Hunt (JBHT) near 113
Lennar (LEN) near 57
KB Home (KBH) near 32.5
Lam Research (LRCX) near 251
Lululemon (LULU) near 202
MKS Instruments (MKSI) near 100
New Oriental Education (EDU) near 114
Reliance Steel (RS) near 110
RH (RH) near 173
Sherwin Williams (SHW) near 556
Temper Sealy (TPX) near 81
Target (TGT) near 113
Visteon (VC) near 84.5