First off, a heads up: I know many of you already follow me on Twitter (@MikeCintolo is my handle), but if not, you should—I usually tweet out a few things a week that I’m seeing in the market or with individual stocks. Costs you nothing, but it’s another way that I can keep in touch with you and share/update some ideas.
The week started out relatively quietly, with the major indexes basically meandering sideways through Wednesday, even after the Federal Reserve’s statement. But since Thursday morning, things have been whipping around (mostly on the upside) as it appears a U.S.-China trade deal/truce is at hand.
As we write this, the major indexes are up 0.4% to 0.8% on the week.
Short-term, the outlook is a coin flip for a couple of reasons. First, of course, is the news flow—we’ve seen a few times this year alone when trade “deals” went up in smoke, so who knows if there are any further shenanigans even after this morning’s announcements.
Second (and more important to us), the internals of the market showed a ton of strength yesterday: The number of stocks hitting new 52-week highs on the Nasdaq was the largest in 18 months. That strength (especially coming after a dearth of new highs in recent months) is a good thing looking a few months down the road, but it often precedes shorter-term indigestion as profit taking sets in.
Bigger picture, though, just about all of the key evidence remains in favor of the bulls—the intermediate- and longer-term trends are pointed up, many longer-term studies look encouraging (the NYSE Composite just hit a new high for the first time in more than a year—in the past, it’s been up every time a year later by an average of 14%; hat tip to @RyanDetrick on Twitter) and, in our opinion, investors remain cautious, with plenty of doubt and skepticism.
Thus, near-term, some wobbles are possible, but overall we think the market’s likely to head higher over time.
Individual stocks have been trickier—some look great and are racing to new highs, but the past couple of weeks have also revealed some potholes, too. There hasn’t been a rash of breakdowns (a few here and there), and we continue to think most (not all) of these initial pullbacks will end up finding support. But honoring stops is obviously important as well.
All in all, we remain bullish, and ideally, the news flow will subside somewhat and stocks can get back to “normal” action. In the meantime, (a) you should consider keeping new buying light, and (b) take things on a stock-by-stock basis—if a name has shown great power and has consolidated (relatively) calmly for a couple of weeks, take a swing at it. Conversely, if something is sinking, honor your stop.
BUY CANDIDATES
Fortinet (FTNT) took off before and after earnings, plowing ahead around 25 points in just a few weeks. And now the stock has gone straight sideways for nearly a month, with one shakeout in early December. Sometimes these tight areas fail, but we’re OK nabbing a small position here with a reasonable stop (near 97 or so) and looking to add more if FTNT decisively pops above 107 or so.
Inphi (IPHI) can be a bit squirrely, so it wasn’t shocking that after its big-volume earnings gap in October, shares sagged back to their 50-day line and the top of the prior consolidation. But this week the stock has come alive again, finishing yesterday at new closing highs. We’re OK starting here or on dips of a point or two, with a stop just under the recent low (65 to 66).
SUGGESTED SELLS
Once again, don’t forget to book a partial profit here or there in some names that are off to good starts for you. Two examples today: Bristol Myers (BMY) and Taiwan Semiconductor (TSM)—if you have decent gains (bought them a few weeks ago), consider letting a portion of your position go and trailing a stop for the rest.
As for outright sells, we have five today, and as always, could have more come Monday depending on the action. The sells are:
Acadia Pharm (ACAD)
InMode (INMD)
Lennar (LEN)
MasTec (MTZ)
Novocure (NVCR)
SUGGESTED STOPS
Agnico Eagle (AEM) near 58
Allegiant Travel (ALGT) near 163
Apollo Global (APO) near 41.5
ASML (ASML) near 265
Boot Barn (BOOT) near 38.5
Bristol Myers (BMY) near 58
Burlington Stores (BURL) near 206
Crocs (CROX) near 33.5
Dexcom (DXCM) near 190
Garmin (GRMN) near 92.5
Generac (GNRC) near 91
Insulet (PODD) near 164
KB Home (KBH) near 33.5
Lam Research (LRCX) near 262
Lululemon (LULU) near 214
MKS Instruments (MKSI) near 103
Neurocrine Biosciences (NBIX) near 104
New Oriental Education (EDU) near 115
Pelaton (PTON) near 28
Reliance Steel (RS) near 113
RH (RH) near 198
Sherwin Williams (SHW) near 560
TAL Education (TAL) near 42
Target (TGT) near 116
TopBuild (BLD) near 103
Visteon (VC) near 87