It’s been a relatively quiet, positive week, as both the S&P 500 and the Nasdaq are each up about 0.5% and the Nasdaq trading in a very tight range. There have been a few pockets of weakness—the S&P 600 Small Cap Index, for example, fell all the way to its 50-day line yesterday—but overall, the intermediate- and longer-term trends of the major indexes are pointed up.
As for individual stocks, it’s a bit of a mixed bag. We continue to think many of this year’s leading, extended growth stocks (those that ran for six-plus months without any meaningful pullback) look suspect; most fell sharply on huge volume earlier this month, and their rebounds have generally been weak (recouping half or less of the recent decline) and/or on very light volume.
On a short-term basis, that action mimics somewhat what we’ve seen in the Nasdaq—a big-volume decline for a few days, and now a light-volume bounce back into resistance.
If you’re holding some former leaders that decisively cracked, this bounce is a good opportunity to sell. And for other stocks that took on lots of water, the key is to look at how they’ve bounced during the past week or two. If a stock has come more than halfway back, it’s probably worth giving it a chance to consolidate. But if a stock fell hard earlier this month and hasn’t been able to get off its knees, we’d be careful, using a tight stop.
Most of the rest of the market looks fine. We continue to see strength and resilience in many stocks that have fresher uptrends (that broke out since September), including many that have lifted off during the past month or so. As always, you should generally hold what’s working (with some partial profits along the way) and dump anything that breaks down or trips your loss limit.
Looking ahead, we’re keeping our eyes open as various sentiment measures are displaying lots of enthusiasm; these are inexact (to say the least), but with so many near extreme levels, it’s certainly possible we could see some more selling ahead.
That said, until proven otherwise, we look at future retreats as buying opportunities, mostly in the fresher leading stocks and sectors.
All in all, we’re keeping our antennae up for any follow-on selling after the early-December downmove, and on the buy side, still picking our spots and looking for good buy points. But in total, we’re mostly bullish, as the primary evidence (trends of the market and leading stocks) is positive.
BUY IDEAS
CF Industries (CF 41) is one of a handful of commodity stocks that is beginning to perk up. The stock made no net progress from mid-September through the end of November, but it never broke support, and now shares have spiked to new highs on big volume. We’re OK buying some here with a stop near 37.
Cree (CREE 38) has also been resting for the most part since a huge mid-October spike, but is now showing signs of getting going after testing its 50-day line for the first time during this upmove. If you don’t own any, you can pick up a few shares around here with a stop at 34.
Grubhub (GRUB 72) is one fresher growth stock (it broke out in late October) you can target on pullbacks. The stock held its 25-day line during the post-Thanksgiving selloff, and moved to new highs since. A dip back toward the 25-day line (now around 67 and rising) would be tempting, with a stop around 61.
Nutanix (NTNX 35) acts very well, refusing to pull back for more than a day or two before buyers step in. Like GRUB, this is one we’d likely target on a dip—a retreat back toward the 25-day line (now nearing 33) would mark a good entry point, with a stop near the 50-day line (just under 30).
ProPetro (PUMP 19) has been a bit wild lately, which isn’t ideal, but the stock broke out just a few weeks ago (early November) and all of its wiggles lately have occurred above its 25-day line. We’re OK sharpshooting an entry point below 19 with a loose (percentage) stop near the 50-day line, near 16.5.
SELL IDEAS
After a rash of sells recently, we have just one outright sell today—Juno Therapeutics (JUNO 44), which plunged through support (and our stop) this week.
Don’t forget to take some partial profits when you have them, especially in stocks that have motored higher for a couple of months without much retrenchment.
SUGGESTED STOPS
AbbVie (ABBV 97) near 91
Abiomed (ABMD 189) near 180
Align Technology (ALGN 233) near 222
Alnylam (ALNY 126) near 119
Caterpillar (CAT 147) near 134
CBOE Holdings (CBOE 126) near 115
CF industries (CF 41) near 37
Cree (CREE 38) near 34
Dana Inc. (DAN 32) near 29.5
DXC Technology (DXC 94) near 89
E*Trade (ETFC 49) near 45.5
Flir Systems (FLIR 47) near 45
Lear Corp. (LEA 172) near 170
Match Group (MTCH 29) near 26.9
Neurocrine Biosciences (NBIX 71) near 67.5
PBF Energy (PBF 33) near 30
Planet Fitness (PLNT 32) near 29
Pure Storage (PSTG 17) near 16.4
Red Hat (RHT 127) near 118
Restoration Hardware (RH 99) near 87
SolarEdge (SEDG 38) near 34
Spirit Aerosystems (SPR 85) near 79
ST Microelectronics (STM 22) near 21
Teledyne Technologies (TDY 183) near 172
Universal Display (OLED 172) near 150
Winnebago (WGO 55) near 48.5
YY Inc. (YY 107) near 97