Despite the outbreak of a coronavirus in China (and a few cases reported elsewhere), the market has actually had a pretty quiet week—as of this morning, the big-cap indexes are up around 0.5%, while broader market indexes (small and mid caps, etc.) are down a smidge.
Overall, the environment has remained the same for the past few weeks: The momentum in the market is very strong, and the price/volume action of leading stocks remains excellent, so you should remain bullish. That said, the risk of a sharp pullback or prolonged consolidation is elevated, so it’s good to keep your feet on the ground.
Concerning the straight-up advance, the title of our Cabot Growth Investor last week was, “Just because it’s unusual doesn’t mean it’s wrong”—from our perspective, the tremendous upside we’ve seen following a 20-month consolidation in the S&P 500 is a good longer-term sign. As was talked about in my webinar yesterday, we’re probably in the middle innings of this cyclical (post-2018 market low) bull phase, which is something to keep in mind.
As for the here and now, just be sure to keep your feet on the ground. We’re fine doing some buying, but continue to look for good entry points and, if a stock is very extended but you really want in, consider starting with a small position. And, if you already own a stock that’s gone to the moon, there’s nothing wrong with booking the occasional partial profit and don’t forget to continue to raise your stops.
Those words of caution aside, though, we’re mostly content to ride our winners, look for pullback-related buys and see how earnings season affects leading stocks. Our Market Monitor will likely remain at a level 8.
BUY CANDIDATES
Alnylam Pharm (ALNY) boomed in late November and has since been consolidating sideways while its 50-day line (now near 114.5) has caught up. Shares have had a couple of shakeouts to the line recently, and both found support. Buying some here with a tight percentage stop near 112.5 is a good risk-reward situation.
Planet Fitness (PLNT) has enjoyed a very nice recovery from its lows, but is now starting to hit resistance near its old highs (near 80-82). A pullback from here would be normal—the idea would be to buy a small position on dips to 77 or below, use a tight stop (72-73 or so) and look to buy more if PLNT can rip above 82 down the road. Earnings are likely out near the end of February.
PTC Therapeutics (PTCT) had a persistent run in October and November, tightened up in December, and despite some volatility this month, has pushed to new recovery highs. We’re OK taking a stab at some shares here, with a stop a bit below the 50-day line (currently at 48.4 and rising).
SUGGESTED SELLS
Today, we have four sells (below), though as always we’ll see if any more look ready to be tossed out come Monday:
Disney (DIS)
Oshkosh (OSK)
Reliance Steel (RS)
TAL Education (TAL)
SUGGESTED STOPS
Aecom Technology (ACM) near 45.5
Alnylam Pharm (ALNY) near 112.5
Amedisys (AMED) near 167
Apollo Global (APO) near 46.5
ASML (ASML) near 285
Boot Barn (BOOT) near 42
Bristol Myers (BMY) near 62
Burlington Stores (BURL) near 218
Crocs (CROX) near 38.5
Dexcom (DXCM) near 200
Dynatrace (DT) near 24.5
Fortune Brands (FBHS) near 65.5
Garmin (GRMN) near 96
Generac (GNRC) near 97
Insulet (PODD) near 173
Jabil (JBL) near 40.5
Kansas City Southern (KSU) near 154
Lam Research (LRCX) near 281
Lululemon (LULU) near 226
Lumentum (LITE) near 74.5
RH (RH) near 205
Splunk (SPLK) near 147
Synaptics (SYNA) near 63.5
Taiwan Semi (TSM) near 55
Tenet Healthcare (THC) near 34.5
WPX Energy (WPX) near 12