Though it’s only been a week and a half, a lot has happened since our last issue was sent (November 20), so let’s dive right in.
The big theme in recent days has been rotation, as the super-hot leading growth stocks have cooled off (including a few that have shown abnormal action) while some of the cyclical and other lagging sectors have gone nuts, pushing indexes like the Dow Industrials sharply higher.
When things get volatile, it’s best to keep a close eye on the actual evidence. With that in mind, here’s what we’re seeing.
First and foremost, it’s a bull market, as the intermediate- and longer-term trends of the major indexes (and most stocks) are still pointed up. Not breaking any news, but it’s important to keep this in mind given the day-to-day gyrations.
Second, most leading stocks are still in good shape, too, and because of the rotation this week, we’re starting to see some new leadership emerge. (We’d expect these names to appear in Top Ten in the weeks to come.)
Third, on the negative side of things, we have seen more and more yellow flags appear among some of the growth stock leaders—exuberant sentiment in recent weeks, some climactic-type moves in a few leaders and stagnation in others, and of course some abnormal selling this week.
All in all, the first two factors are keeping us bullish overall. However, it’s vital to take things on a stock-by-stock basis. If some of your stocks haven’t done much in recent weeks and are beginning to look ragged, sell or keep a very tight stop in place. And if you have a big winner you’ve been riding for months that’s looking iffy, it’s OK to take partial profits, especially if you haven’t done so during its run.
On the flip side, though, we wouldn’t be in a hurry to sell stocks that are holding up well; after big upmoves, many stocks were due for a rest. And on the buy side, look for fresher opportunities (stocks that have begun their runs within the past three months or so), whether that’s growth or cyclical.
Going forward, it’s important to keep your antennae up—broad weakness and breakdowns among individual stocks could have us turning more cautious, but right now, there are still plenty of good-looking stocks and the rotation is producing more opportunities.
BUY IDEAS
DXC Technology (DXC 96) isn’t a go-go name, but it acts very well and this week’s retreat looks normal—shares nearly touched 100 last week but have pulled back to the mid 90s. DXC could pull back further, but we’re OK buying here with a stop just below 90.
E*Trade (ETFC 48) has come to life along with many Bull Market stocks in recent days, lifting to new highs each of the past three days on excellent volume. You could nibble here or target dips toward 47, with a stop below 44.
Oil stocks have been hit or miss, but we really like the action of ProPetro (PUMP 19), which continues to push higher despite some wobbles in the group. It’s extended, but a dip of 50 to 75 cents would be tempting, at least for a small position, with a loose stop near 16.
Salesforce.com (CRM 104) had a nice, persistent uptrend from mid-October through mid-November before a reasonable dip during the past week. Maybe it keeps falling, but with the 50-day line near 100, buying some here with a stop around, say, 98, makes for a nice-risk-reward trade.
SVB Financial (SIVB 229) gapped up on earnings in late October, pulled back in early November and has come alive in recent days, lifting to new highs on solid volume. This is a solid growth-oriented bank, too. We think it’s buyable around here with a stop just below 210.
SELL IDEAS
We have many sells in today’s update, most of which tripped stops or otherwise have fallen apart on huge volume. As always, some of these stocks could bounce, so if you want to give them a little rope, that’s fine. But we’re selling and moving on to greener pastures.
This week’s sells are: ASML Holdings (ASML 174), Guidewire Software (GWRE 73), Ligand Pharmaceuticals (LGND 131), Micron Technology (MU 42), MKS Instruments (MKSI 93), ON Semiconductor (ON 20), Sociedad Quimica (SQM 54), Square (SQ 39), Tronox (TROX 24) and Yelp (YELP 44).
SUGGESTED STOPS
58.com (WUBA 74) near 67
Abiomed (ABMD 193) near 178
AbbVie (ABBV 97) near 89
Alibaba (BABA 179) near 169
Align Technology (ALGN 259) near 219
Alnylam (ALNY 137) near 118
Arista Networks (ANET 230) near 207
Atlassian (TEAM 47) near 44.5
Axcelis Technologies (ACLS 31) near 30
CBOE Holdings (CBOE 124) near 111
CF industries (CF 38) near 34.9
E*Trade (ETFC 48) near 43.5
Facebook (FB 177) near 171
IPG Photonics (IPGP 227) near 207
Juno Therapeutics (JUNO 56) near 48.5
Lear Corp. (LEA 179) near 170
Match Group (MTCH 29) near 26.9
Monolithic Power (MPWR 117) near 114
Nintendo (NTDOY 50) near 47.5
Nvidia (NVDA 199) near 191
Planet Fitness (PLNT 32) near 28
Pure Storage (PSTG 17) near 16.4
Red Hat (RHT 126) near 117
Salesforce.com (CRM 104) near 100
SolarEdge (SEDG 35) near 32.5
Spirit Aerosystems (SPR 83) near 77.5
ST Microelectronics (STM 22) near 21
Take-Two Interactive (TTWO 111) near 105.5
Tower Semiconductor (TSEM 35) near 33
Vishay (VSH 22) near 20.9
Universal Display (OLED 178) near 150
Winnebago (WGO 55) near 46.5
YY Inc. (YY 104) near 94
Zogenix (ZGNX 39) near 34.5