As earnings season has picked up, we’ve been pleased to see mostly positive reactions across the market and individual stocks, including some potential fresh leaders. As for the indexes, it’s been a solid across-the-board advance through Thursday, with the Nasdaq and small caps up more than 2% on the week and the S&P 50 up nearly 1%—and that’s before this morning’s tech-induced pop.
Certainly, up is good, and so this week adds some to the bullish vibes. And it’s possible today changes things for the better if the mega-cap gaps likely this morning spread to the far corners of the market.
But overall, not much has changed with our thinking—this is a bull market, and with the big-picture evidence bullish (long-term trend, tame sentiment in general, lots of bullish longer-term studies, etc.), we expect higher prices down the road. Indeed, few leading stocks have cracked and we’re seeing more join the party.
That said, near-term, many names have lost a little steam; the number of stocks hitting new highs has been easing for most of July on the Nasdaq, and that index has hit some resistance for the first time since the March lows. That’s far from a red flag, but it does mark a small change in character.
As I wrote in last night’s Cabot Growth Investor issue, when you put it all together, we think you should stay on the freeway (remain mostly bullish), but it’s OK to ease off the accelerator a bit, whether that means booking a partial profit or two, tightening stops and/or being more discerning with new buys.
From here, we’re OK moving in either direction. If the continued positive action following earnings reports continues, it will probably have us extending our line; if the Nasdaq falters, though, we could pare back a bit. Right now, though, we’re comfortable with our Market Monitor at a level 7.
SUGGESTED BUYS
Following its big breakout two and a half weeks ago, Alibaba (BABA) has tightened up some and avoided any major distribution. We’re OK picking up shares here if you don’t own any, with a stop in the 230 area.
Coupa Software (COUP) is probably THE leader among software/cloud stocks and it’s had a big run. That said, it’s now three weeks into a rest period and today’s poor earnings reaction from Atlassian (TEAM), which isn’t a leader in this run, could pull it down. Long story short, dips under 290 would be tempting, with a stop under the rapidly rising 50-day line (now near 265).
SUGGESTED SELLS
Biohaven Pharma (BHVN) tripped its stop and thus has been sold.
Bloom Energy (BE) is also a sell after tripping our loss limit following a poor earnings reaction.
We’ll have more sells come Monday, likely from culling from the list a few good-not-great performers, as we’ve been doing.
SUGGESTED STOPS
Alibaba (BABA) near 230
Bandwidth (BAND) near 127
Big Lots (BIG) near 35
Carrier Global (CARR) near 22
CrowdStrike (CRWD) near 97
Datadog (DDOG) near 80
Fastly (FSLY) near 70
Immunomedics (IMMU) near 35.5
Inphi (IPHI) near 111
LGI Homes (LGIH) near 93
Lululemon (LULU) near 297
Marvell Technology (MRVL) near 33.5
Nu Skin (NUS) near 42
Nvidia (NVDA) near 364
Pacira Pharm (PCRX) near 48
Pan American Silver (PAAS) near 30
Pelaton (PTON) near 53.5
Plug Power (PLUG) near 7.2
Restoration Hardware (RH) near 247
Roku (ROKU) near 135
Seattle Genetics (SGEN) near 161
Splunk (SPLK) near 190
Star Surgical (STAA) near 52
Teladoc (TDOC) near 170
Tesla (TSLA) near 1190
Thor Industries (THO) near 99
Ultragenyx (RARE) near 75
XP Inc. (XP) near 41
Zoom Video (ZM) near 220
Zscaler (ZS) near 102