NOTE: With Monday being a holiday, next week’s issue of Cabot Top Ten Trader will be emailed next Tuesday, September 8. Have a good and relaxing long weekend.
It hasn’t been all bad over the past four or five weeks of course, but we did see an accumulation of yellow flags, including some big-volume selling, a thinning out of the advance, and the major indexes moving out of trend on the upside. And we think, for growth stocks anyway, this week appears decisive—we’re seeing a lot more abnormal action, including 50-day line breaks, intermediate-term toppy patterns (double tops, etc.) and many huge-range weekly bars with massive volume up, and then back down.
Now, to be fair, we’re trend followers at heart, and the trends of the major indexes remains up, and even among growth stocks, there are a bunch that haven’t cracked intermediate-term support. Throw in the fact that the market and some key leaders have shaken off a couple of bouts of abnormal action in recent months and we’re remaining flexible.
But this was already a tricky market to make (and keep) money in, with quick, violent moves up and down and tons of rotation and news-driven action. And this week’s rash of selling damages the picture. The way we’re thinking about it is that the onus is on the bulls to step up and support leading names—if they do, there could be some solid buying opportunities in names that have held up decently of late. But until then we’d rather play things a bit cautiously.
Outside of growth stocks, the situation is far less threatening—we still see some wobbles, but the action looks normal across most Top Ten names that aren’t in the technology/chip/medical space. We’d still advise picking your spots, but we’re not opposed to taking a small position or two on dips with stocks that are still in solid uptrends.
Overall, though, we’d favor being safe than sorry, especially if you’ve built up some great gains this year, while keeping a list of stocks holding up should the bulls make a stick save in the days ahead. We are paring back on many names this week, and will move our Market Monitor down two or three notches come Tuesday.
SUGGESTED BUYS
Freshpet (FRPT) is finally pulling back, but in a normal fashion. Further dips are certainly possible, but we’re OK snagging some here or lower with a stop under the 50-day line (now at 98.5 and rising).
Pacira Pharm (PCRX) has chilled out for about a month and the 50-day line (near 57 and rising) is catching up. We’re OK picking up shares here with a 5-ish point stop.
Penn National Gaming (PENN) continues to act well, tagging its 25-day line today on modest volume. If you’ve been waiting for a pullback, we’re OK starting a position here, albeit with a looser loss limit (maybe 15% from your cost).
SUGGESTED SELLS
Big Lots (BIG)
Bill.com (BILL)
Cerence (CRNC)
Chegg (CHGG)
Cloudflare (NET)
Coupa Software (COUP)
Daqo (DQ)
DocuSign (DOCU)
Emergent Bio (EBS)
Etsy (ETSY)
Immunomedics (IMMU)
Invitae (NVTA)
LGI Homes (LGIH)
Okta (OKTA)
Qorvo (QRVO)
Trade Desk (TTD)
Zscaler (ZS)
SUGGESTED STOPS
Alibaba (BABA) near 258
Azek Co. (AZEK) near 35
Carrier Global (CARR) near 26.5
Chart Industries (GTLS) near 62
Digital Turbine (APPS) near 20
First Solar (FSLR) near 64
Kinross Gold (KGC) near 8.0
Innovative Indus. Prop. (IIPR) near 105
Kirkland Lake (KL) near 47
LivePerson (LPSN) near 47
Nvidia (NVDA) near 435
Pacira Pharm (PCRX) near 56
PayPal (PYPL) near 179
Peloton (PTON) near 65
Plug Power (PLUG) near 10.2
Redfin (RDFN) near 40.5
Roku (ROKU) near 146
Sea Ltd. (SE) near 130
Shift4 Payments (FOUR) near 43
Tesla (TSLA) near 340