It’s been an up-and-down week for the major indexes—as of this morning, the S&P 500 was down less than 1% on the week, the Nasdaq was up less than 1% and the broader indexes (small/mid caps, etc.) were down a bit more than the S&P.
Bigger picture, not much has changed with the overall outlook: Yes, there are a few yellow flags (very bifurcated environment, etc.), but at this point, the trends of the major indexes are up and leading stocks remain under strong accumulation. Moreover, some secondary stuff like our Aggression Index (growth vs. defensive stocks) is solidly positive and the number of stocks hitting new lows is still tame (though picking up a smidge).
Thus, we remain mostly bullish and advise you to remain heavily invested.
That said, in the near-term, there are a few things to keep an eye on. First, the latest upmove (coming after the June 11 shot across the bow) has seen the Nasdaq hit a fresh high and many growth stocks light up the sky, but not much else joined the party—every other index and most sectors (even chip stocks) failed to confirm the move to virgin turf. In fact, a 2% to 3% drop from here could actually put the intermediate-term trend of the market as a whole on the fence.
Second, on Tuesday, the number of stocks hitting new highs on the Nasdaq reached its highest level since February (200), which is good overall (more stocks participating), but such a surge in buying can often lead to some near-term selling/choppiness.
And third, we’re seeing far fewer good-looking entry points among leading stocks. That can always change in just a few days, but most of the names we’re watching look extended on a short-term (big runs the past couple of weeks) and possibly intermediate-term (most broke out many weeks ago) basis.
As has been the case when the occasional yellow flag or two has popped up, none of these “heads ups” are reasons to start paring back drastically or anticipate a huge decline. But it is another reminder to keep your feet on the ground—raise your stops and/or take some partial profits as stocks work their way higher, and on the buy side, aim to get in on dips and avoid going hog wild with names sticking straight up in the air.
These moves will allow you to make more money should the trend continue, but not get you overextended in case the sellers make a stand.
SUGGESTED BUYS
Big Lots (BIG), which was written up this week, was in the fourth week of a very reasonable pullback and was showing some tightness when the firm released a very bullish business update today (current quarter earnings likely north of $2.50 per share, vs. estimates of $0.84). It’s projected to pop at the open, which makes buying tricky, but we think the stock is generally buyable on this move with a stop near the recent lows (32-33 area).
Elastic (ESTC) continues to act like it’s turned the corner after a long post-IPO drought, with an early-June test of the 25-day line leading to seven days up in a row to new recovery highs. Dips to 90 or below would be tempting, with a stop in the 80 area.
Inphi (IPHI) may need more time to consolidate—it’s pulled back for four weeks after more than doubling from its March lows over a 10-week stretch. But shares have started to find some support near their 50-day line and the story seems as good as ever. You could start a position here with a stop in the 104 area.
Thor Industries (THO) had an accelerated move higher into early June, had a positive reaction to earnings and has generally marked time during the past couple of weeks. Further weakness, possibly to the 25-day line (now at 103 but rising quickly) would be a nice entry point if you’re not already in. A stop in the low 90s seems appropriate if you enter.
SUGGESTED SELLS
As mentioned above, don’t hesitate to ring the register a bit if a stock you own has had a big run over many weeks and you have a solid profit—Spotify (SPOT) is one example (though there are many) where you could trim a portion of your position and trail a stop for the rest.
As for outright sells, we’re going to take our profits in Schrodinger (SDGR), which is up more than 50% in less than two months and has just popped.
We’re also going to ring the register on Square (SQ), which is a name we like but we’ll take the 20%-ish profit in just three weeks.
SUGGESTED STOPS
Arconic (ARNC) near 14.5
ASML (ASML) near 323
Avalara (AVLR) near 107
Beyond Meat (BYND) near 127
BJ’s Wholesale (BJ) near 32.5
Carrier Global (CARR) near 19.5
Ciena (CIEN) near 50
CrowdStrike (CRWD) near 85
Five9 (FIVN) near 95
Immunomedics (IMMU) near 29
Inphi (IPHI) near 104
Neurocrine Bio (NBIX) near 114
Nvidia (NVDA) near 329
Pan American Silver (PAAS) near 24.5
Pelaton (PTON) near 43.5
Schrondinger (SDGR) near 62
Seattle Genetics (SGEN) near 151
Teladoc (TDOC) near 156
Tesla (TSLA) near 835
Zoom Video (ZM) near 193
Zscaler (ZS) near 91