The market returned to its old ways this week, with the Nasdaq posting decent gains (up more than 1%), while the S&P 500 was up a smidge and broader indexes fell. As you’d expect, the growth stocks that have wobbled of late perked up, while the broad market sagged a bit.
In our book, this week was a plus, though it hasn’t really changed the underlying picture—the overall market looks good, but it’s thinning out (just 79 Nasdaq stocks hit new highs during yesterday’s big rally, down from ~270 earlier this month!), and most leading stocks are still showing iffy action.
Now, to be fair, that’s not true across the board; there have been some notable bullish things we’ve seen. First, a couple of leaders that broke intermediate-term support have quickly snapped back, raising the prospect that these were just shakeouts. A couple have actually popped to new highs on excellent volume, which is always a plus.
Moreover, going through a bunch of screens this week, we’re seeing many leaders that are now six weeks into rest phases. They could easily need more time, of course, and there’s nothing that says the selling won’t resume next week. But it’s a decent start, and if leaders can round out a bit in the weeks ahead, the recent dips could be part of a normal base-building effort.
That’s looking ahead, though—when examining the current situation, it’s not awful, but we continue to see rougher, choppier sledding for most names and relatively few stocks letting loose on the upside. That doesn’t mean you should be in your bunker, but picking your buy points carefully, possibly starting with smaller positions, while honoring stops (not too tight!) on winners.
We’ll likely leave our Market Monitor at a level 6 in next week’s issue.
SUGGESTED BUYS
Alibaba (BABA) hasn’t followed through from its breakout in early July, but that might be a good thing—it’s had a lot of tight weekly closes since then and, despite a minor earnings wobble, looks like it may want higher. If you don’t own any, we’re not opposed to starting a position here and adding on the way up.
Trade Desk (TTD) hasn’t suffered the same wobbles as many growth stocks, with a reasonable, tight correction in July, new highs earlier this month, and a low-volume pullback of late. You can start a position here with a stop near 430.
Both Qorvo (QRVO) and Qualcomm (QCOM) broke out near the end of July, and both have held their gains and consolidated quietly of late. We’re OK taking a stab at either of them here—QCOM with a stop around 100, QRVO near 118 or so.
SUGGESTED SELLS
We have four sells today, and as always more are possible come Monday:
Crispr Therapeutics (CRSP) – failed breakout. Could use a stop near 85 if you want to give it a chance
DR Horton (DHI) – just booking a solid, month-long profit in a bigger name
Lululemon (LULU) – Looks great, but low-volume move to new highs, earnings coming up. Booking a solid profit
Pinduoduo (PDD) – earnings miss today
SUGGESTED STOPS
Alibaba (BABA) near 241
Bandwidth (BAND) near 133
Big Lots (BIG) near 40.5
Bill.com (BILL) near 83.5
Carrier Global (CARR) near 25.5
Coupa Software (COUP) near 274
Immunomedics (IMMU) near 38.5
Invitae (NVTA) near 28.5
LGI Homes (LGIH) near 99
Lululemon (LULU) near 320
Nvidia (NVDA) near 410
Pacira Pharm (PCRX) near 54
Pan American Silver (PAAS) near 31.9
Peloton (PTON) near 58.5
Plug Power (PLUG) near 10.2
Redfin (RDFN) near 39
Roku (ROKU) near 140
Sea Ltd. (SE) near 123
Tesla (TSLA) near 1500
Trade Desk (TTD) near 425
Ultragenyx (RARE) near 79.5
Zscaler (ZS) near 112