Stocks moved lower again this week, though we will say the buyers have at least put up a little bit of a fight, with both Wednesday and (so far) this morning showing some buying. That has kept the market’s intermediate-term trend positive (it’s close, but we don’t anticipate these things), and has allowed many fresher leaders to hang in there.
That’s at least a first step, so we’ll take it. But at this point, it doesn’t come close to negating the rash of abnormal selling we saw last week, and thus, it doesn’t alter our view—we continue to think the burden of proof is on the bulls to step up so the indexes and many leaders can recoup a good chunk of their recent losses.
Until then, we’re favoring being safe rather than sorry, holding a good-sized cash position, being discerning on the buy side and keeping new positions small.
Of course, as we wrote last week, we’re open to anything—maybe the recent selling wave, which came after four to six weeks of iffy action, was a big shakeout that gives way to higher prices in the near future.
Moreover, it’s not like the overall market is in shambles. To this point, we haven’t seen any longer-term abnormal selling in the indexes or leaders (indicative of a more major top), and many areas and stocks are acting just fine. Granted, not many are really making much upward progress, but plenty are acting normally.
In other words, we don’t advise you to be in your storm cellar or to necessarily anticipate a huge correction going forward. Just take it day to day and see how it plays out—right now, the skies look threatening, so you should be staying relatively close to shore.
SUGGESTED BUYS
Agnico Eagle (AEM) has set up a really nice flat base during the past few weeks and is threatening the top of its range. We’re OK starting here, with a stop near 74, with the idea of adding if the stock really gets going.
Berry Plastics (BERY) has solid earnings estimates despite a stodgy business, and after a nice run, the four-week pullback on light volume has set up a solid risk/reward trade—you can buy some here with a tight stop in the upper 40s.
After a big advance, Meritage (MTH) toyed with the century mark for a while before being yanked down to its 50-day line along with the market. While volume has been light, the stock has bounced well. If you don’t own any, starting small here with a stop near the recent lows (90 to 92 or so) makes sense.
Maybe it will get caught up with the market, but we still think Quanta Services (PWR) is acting great given the environment, with next to no selling of late after a big breakout in early August. With the 25-day line (now near 50.5 and rising) catching up, you could take a swing at it here.
SUGGESTED SELLS
Our only sell today is Azek Co. (AZEK), which tripped our stop after a share offering. We could have some more sells come Monday in names that have been unable to bounce much but we’ll see what things look like then.
SUGGESTED STOPS
Alibaba (BABA) near 259
Arconic (ARNC) near 18.5
Carrier Global (CARR) near 26.9
Chart Industries (GTLS) near 62
Digital Turbine (APPS) near 20.5
First Solar (FSLR) near 66
Futu (FUTU) near 28.5
Kinross Gold (KGC) near 8.2
Innovative Indus. Prop. (IIPR) near 108
Kirkland Lake (KL) near 48
Lithia Motors (LAD) near 220
LivePerson (LPSN) near 47.5
Nvidia (NVDA) near 440
Pacira Pharm (PCRX) near 56.5
PayPal (PYPL) near 179
Peloton (PTON) near 75
Plug Power (PLUG) near 10.5
Redfin (RDFN) near 44
Roku (ROKU) near 147
Salesforce.com (CRM) near 234
Scott’s Co. (SMG) near 152
Sea Ltd. (SE) near 131
Shift4 Payments (FOUR) near 44
Watsco (WSO) near 228
Whirlpool (WHR) near 160