Sellers have come out of the woodwork during the past couple of days, especially when it comes to the Nasdaq and leading growth stocks. The action isn’t overly concerning when you look at the general market, but when you look at individual stocks, the situation is a bit trickier.
First, the market as a whole: Right now, the day-plus selloff hasn’t done much if any damage to the major indexes—even the Nasdaq is still clearly above its 50-day line (and also near its June peak), while the other indexes are still above their shorter-term 25-day lines. In other words, the intermediate-term trend is still up, and the broad market is in good shape.
As for individual stocks, most of the evidence is still positive, but the picture isn’t as clear. Of the stocks that have lifted to new highs (growth stocks or anything else), few have made any meaningful runs; as always, there are exceptions, and there are a few areas (like emerging market stocks) that are very strong, but most are futzing around.
Moreover, there are a ton of stocks that have rallied back toward their June peaks on low volume ahead of earnings—not bad action, but not a clear indication the stocks are in intermediate-term uptrends, either.
All of that said, the rally is just three weeks old, so we don’t expect hundreds of stocks to be skyrocketing already. Bottom line: Far more stocks are in good shape than not, so we’re leaving our Market Monitor at a level 8 right here.
But we continue to think that the next two or three weeks (the rest of earnings season) will be key—if more and more stocks lift off, the rally should get legs and there should be some great buying opportunities. But if most stocks come under pressure, the odds will rise that leading stocks need more time to consolidate. Right now, the odds favor upside, so you shouldn’t be too shy, but we want to see further confirmation before flooring the accelerator.
BUY IDEAS
Autodesk (ADSK 111) rallied back to its prior (May) peak on decent volume and it’s hit some turbulence this week, which is normal. We’re not against nibbling here (with a stop around 105), or just waiting to see if the stock can settle down a bit and eventually lift north of 115, which would be a buy signal.
Regeneron Pharmaceuticals (REGN 504) is another stock that’s set up well should earnings (due next Thursday, August 3) be well received. The stock has consolidated in a relatively tight range since its huge-volume surge in mid-June, and the 50-day line (now at 490) is catching up. You could nibble here, or just see what happens on earnings—a decisive move above 530 would be bullish—and use a stop near 490. As for the stock price, don’t fret, just buy fewer shares; pretend the stock is at 50 instead of 500, for instance.
U.S. Concrete (USCR 76) broke out nicely in the second half of June, but it’s since stagnated and recently pulled back toward its 50-day line. We’re not opposed to taking a small position here with a tight stop (near 70 or 71), or just waiting to see what earnings (due August 8) brings—a leap above 80 would be highly bullish.
Wayfair (W 77) continues to act well—it’s moved generally sideways since late June, though it has tried twice to poke to new highs and been smacked back both times. The stock is very volatile, but with the 50-day line catching up (now above 72), we’re OK with a small position here, or wait to see how earnings (due August 8) are received. A push above 80 should present a new entry point.
SELL IDEAS
The market’s turbulence this week caused a few stocks we follow to crack, and many more to approach support. This week’s Sells include American Airlines (AAL 49), Berry Plastics (BERY 56), Domino’s Pizza (DPZ 182), Graco (GGG 113), MiMedx Group (MDXG 15) and Western Digital (WDC 86), which gapped down on earnings today. There is some support near 84, but we’re going to move quickly and cut our loss given the gap.
Also, Graco tripped our stop … and then gapped up on earnings the next day. If you still own it, you can hang on with a stop near 109. But for our recordkeeping, we’ll assume we got stopped out.
SUGGESTED STOPS
Activision Blizzard (ATVI 61) near 57.5
Adobe Systems (ADBE 146) near 140
Arista Networks (ANET 150) near 147
Autodesk (ADSK 111) near 105
Autohome (ATHM 48) near 44
Bob Evans (BOBE 70) near 66
Boyd Gaming (BYD 26) near 24.8
CoStar Group (CSGP 273) near 260
Exact Sciences (EXAS 39) near 34.5
First Republic Bank (FRC 99) near 96
Global Payments (GPN 94) near 89.5
ILG Inc. (ILG 27) near 26
Impinj (PI 50) near 48.5
InteractiveCorp (IAC 106) near 101
IPG Photonics (IPGP 155) near 143
iRhythm Technologies (IRTC 154) near 39.5
JD.com (JD 41) near 40.5
LendingTree (TREE 216) near 172
Lumentum (LITE 61) near 58
Medidata Solutions (MDSO 77) near 74
Nintendo (NTDOY 42) near 38
Nvidia (NVDA 163) near 147
Paycom Software (PAYC 70) near 66.5
Penn National Gaming (PENN 21) near 20
Planet Fitness (PLNT 23) near 22
Regeneron Pharmaceuticals (REGN 504) near 480
ServiceNow (NOW 110) near 104
SiteOne Landscape (SITE 52) near 50
Square (SQ 26) near 23
Summit Materials (SUM 28) near 27.9
Take-Two Interactive (TTWO 79) near 74
Teledoc (TDOC 34) near 31
Terex (TEX 39) near 36
Trade Desk (TTD 53) near 48.5
Universal Display (OLED 121) near 108
Veeva Systems (VEEV 63) near 58
Vertex Pharmaceuticals (VRTX 155) near 135
Workday (WDAY 103) near 98
XPO Logistics (XPO 60) near 57.5
Zillow (Z 45) near 44