The market had a shot across the bow last week and opened lower on Monday, but in impressive fashion, the indexes have bounced nicely—as of this morning, the S&P was up 2.4% on the week while the Nasdaq was in the green by 3.7%.
As has been the case for a while, the bifurcated action remained in place. This week, it was growth stocks’ turn to do well, with many shooting higher; the number of new 52-week highs on the Nasdaq hit a four-month high on Wednesday. That’s not to say the cyclical/broad market stuff did badly—financials, transports and the like are still up decently this week—but growth stocks were the focus of the buying.
As we wrote in Cabot Growth Investor yesterday, you’re never going to get a situation where every data point lines up bullishly; today there are many things to worry about (a second wave of coronavirus, etc.), and even among indicators there are some yellow flags (massive amounts of small call option buying tells us speculative juices are flowing).
But when you look at the weight of the evidence, there’s no question it continues to point up—the intermediate-term trend of all the major indexes is still pointed up, Cabot’s Aggression Index (relative performance of the growth-y Nasdaq vs. the defensive consumer staples sector) is firmly positive and, even with the on-again, off-again broad market, the number of stocks hitting new lows is minuscule.
That doesn’t mean the market can’t turn tail—for instance, it’s possible the Nasdaq 10,000 level could continue to provide resistance, or maybe we leap above it to suck in late buyers before pulling back. Plus, now that we’re 13 weeks into the rally, buy points will become more important as there will likely be more bouts of rotation and profit taking.
Thus, flexibility remains key, but the overall story remains the same: Most of the evidence is bullish, so you should be, too.
Neurocrine Bio (NBIX) hasn’t done anything since our write-up in late May, but we think it has a nice pattern set up—shares are four weeks into a rest period after a big off-the-bottom run, and are bouncing off their 10-week line. You could take a swing at it here with a tight (percentage) stop near 112.
Marvell Technology (MRVL) was written up just two weeks ago, but we like this pullback as the 25-day line (now at 32.5) catches up. If you don’t own any, you could snag some here or on dips of a point or two.
With some amazing moves this week, don’t forget to book partial profits if you have decent gains and then try to let the rest ride. Spotify (SPOT) is a good example, as it’s gone vertical over the past three days. Consider selling some and holding the rest.
As for outright sales, we have three today, but as usual, will probably prune some more from the list come Monday:
Atlas Air (AAWW)
TG Therapeutics (TGTX)
Allogene (ALLO) near 40
Arconic (ARNC) near 14.5
ASML (ASML) near 318
Avalara (AVLR) near 97
Carrier Global (CARR) near 19
Ciena (CIEN) near 49.5
CrowdStrike (CRWD) near 83
Five9 (FIVN) near 93.5
Halozyme (HALO) near 22
Immunomedics (IMMU) near 28.5
Inphi (IPHI) near 102
Neurocrine Bio (NBIX) near 112
Nvidia (NVDA) near 317
Pan American Silver (PAAS) near 24
Pelaton (PTON) near 40.5
Schrondinger (SDGR) near 59.5
Seattle Genetics (SGEN) near 146
Teladoc (TDOC) near 152
Zoom Video (ZM) near 189
Zscaler (ZS) near 90