It’s been a down week for the major indexes, but all in all, nothing out of the ordinary—most major indexes are down 2% to 2.5% on the week, and the intermediate-term green light we received a week ago remains intact.
Of course, there have been some wobbles, with Tuesday seeing across-the-board selling (negative oil prices!) and yesterday seeing a higher-volume reversal, partially due to the Gilead trial news. But such action isn’t unexpected—most stocks are still sitting below some resistance (longer-term moving averages, etc.) and volatility in the market (the VIX is still north of 40) is still elevated, so potholes here and there are likely to be part of any rally.
Beyond the indexes, we’re still finding more positive than negative among the evidence. Yesterday, for instance, was the 13th straight day of subdued numbers of stocks hitting new lows, which is a general way of measuring selling pressures. Investor sentiment remains worried by many measures (the AAII weekly survey has shown a ton of bears seven weeks in a row). And most individual leading stocks are still in good shape—many have wobbled, but none have shown any abnormal selling.
Thus, we remain optimistic, though we’re just playing it by the book—we took a couple steps back into the market’s waters based on the intermediate-term buy signal (our Market Monitor is likely to remain at a level 6), and we want to see continued upside from the indexes and leading stocks (including some new names that could emerge on earnings) to extend our line.
On the downside, a 4%-ish drop in the market would put the new buy signal on the fence, and we’ll obviously be watching the action of the leaders for any clues that big investors are bailing on the rally. If either of those happen, we’ll retreat back into our bunker.
Right now, though, the improvement in the evidence that has slowly built up over the past month remains in place.
BUY CANDIDATES
Coupa Software (COUP) rallied nicely earlier this month back toward its highs from January/February, and like the market, it’s suffered a couple shots across the bow this week. But it actually found good-volume support yesterday, and could be starting a last, normal dip before a breakout attempt. We’re OK nibbling here (stop around 144) with the idea of buying more on a strong push above 170.
It’s sort of a similar story with Nvidia (NVDA), which rallied back up to the 300 level, shy of its February peak near 315. It’s since backed off, but this could be the start of a “handle” or shallower rest before a breakout attempt. Nibbling here is fine with a stop near 260, and you could add to the position on a powerful leap north of 300.
RingCentral (RNG) has a slightly different chart but a similar concept—it hit 250 or so in February and then imploded with the market. It snapped back to new highs late last month but backed off again, to 195. This week it again tested the 250-255 area and has started to pull in. A small buy here or on dips with a stop near 217 is fine, possibly buying more on a push above 255.
SUGGESTED SELLS
Immunomedics (IMMU) popped yesterday after the FDA gave a thumbs up to its drug—given the sudden windfall, we’d probably at least take some off the table.
Also, in general, it’s good to remember to take a few chips off the table if you have a stock that’s been running quickly higher over the past few weeks.
Today, we don’t have any sells, though we added a few stops to our list below and are keeping a close eye on some laggards to prune.
SUGGESTED STOPS
Atlassian (TEAM) near 140
Bilibili (BILI) near 25
GDS Holdings (GDS) near 54
Gilead (GILD) near 73.5
Pelaton (PTON) near 27
Repligen (RGEN) near 97.5
Slack (WORK) near 25.5
Vipshop (VIPS) near 15.5
Zscaler (ZS) near 59.5