You could pretty much copy our write-ups from the past two or three Movers & Shakers and paste them here, as nothing has changed with the market environment. We remain (a) in a very strong bull trend, which (b) portends higher prices in the months ahead, but (c) has left most indexes, sectors and stocks very extended to the upside.
Thus, our advice remains the same: You should be heavily invested, but don’t forget to bang out some partial profits on the way up and honor your mental stops. (Don’t forget to raise your stops along the way, too.) And on the buy side, we think it’s best to stay selective. On that front, we believe any market pullback (or even sharp sector rotation) could provide some very nice “first thrust” entry points, which occur when a stock breaks out of a long base, has a nice multi-week advance (upside follow through) and then pulls back (sometimes sharply) to its 25-day moving average or other support. It’s something to watch for.
Beyond that, we’ll be watching earnings season closely. Given the run most stocks have enjoyed, a few reasonable hiccups can be expected (if a stock has just run up 10 points, a three-point gap down isn’t something to panic over). But we’ll be on the lookout for a rash of major blowups, and of course, searching for any new leadership that emerges on a bullish earnings gap.
In the meantime, though, we’re mostly riding out the uptrend, giving our strong stocks a chance to keep rising, while raising mental stops along the way.
BUY IDEAS
We’re still not seeing many low-risk entry points given the market environment, so right now, it’s more about finding strong situations and aiming to buy on any dip or shakeout that comes.
Charles Schwab (SCHW 55) reported a fine quarter this week, and while the stock didn’t react much to the news, the chart looks great—SCHW broke out powerfully after Thanksgiving, rested in December, and has resumed its uptrend on many days of huge volume so far this year. Dips to 54 would be tempting, with a stop near 50.5.
Freeport McMoRan (FCX 20) has suffered a handful of big-volume selling days recently, but the stock is still perched near its high. You could nibble here, but a dip (maybe a quick one) below 19 would provide a good entry, with a stop in the low 17s. Just note that earnings are due out next Thursday.
We wouldn’t say MercadoLibre (MELI 341) is at a pristine entry point, but we’re intrigued with the overall action, including lots of tightness near the end of its multi-month base (usually a sign that all the weak hands are out) and nice resilience after being downgraded soon after its breakout in December. MELI has moved to new highs in recent days—look for dips toward the 25-day line (near 328 and rising quickly) to enter. Earnings are likely out in mid-February.
USG Corp. (USG 39) gapped up earlier this month on some positive analyst commentary, but has since pulled back on modest volume to its 25-day line. We’re OK with buying some here and using a stop around 36.5. Earnings are due out February 1.
SELL IDEAS
Old Dominion (ODFL 147) is this week’s example of a stock to take partial profits in—shares have been riding their 25-day line higher since early September, and now, the stock is moving straight up, which is often (not always) a near-term sign of exhaustion. Consider selling some here and riding the rest with a trailing stop.
Despite the strong market, we do have seven sells today, most of which have tripped their stops: Alnylam (ALNY 124), CF industries (CF 40), PBF Energy (PBF 33), Roku (ROKU 40), SolarEdge (SEDG 35), Trex (TREX 112) and Winnebago (WGO 52).
SUGGESTED STOPS
AbbVie (ABBV 104) near 96
Abiomed (ABMD 228) near 203
Adamas (ADMS 38) near 33
Beacon Roofing (BECN 62) near 59.5
Boise Cascade (BCC 42) near 38.5
Caterpillar (CAT 169) near 151
CBOE Holdings (CBOE 133) near 122
Conn’s (CONN 36) near 33
Dana Inc. (DAN 33) near 31.5
D.R. Horton (DHI 51) near 49
DXC Technology (DXC 100) near 95.5
E*Trade (ETFC 54) near 48.5
Etsy (ETSY 20) near 18.9
Flir Systems (FLIR 52) near 47.5
Global Blood Therapeutics (GBT 55) near 46
ICU Medical (ICUI 234) near 212
Insulet (PODD 74) near 68
KB Home (KBH 35) near 32.5
Lear Corp. (LEA 191) near 179
Match Group (MTCH 32) near 29.5
Neurocrine Biosciences (NBIX 80) near 73.5
Nutanix (NTNX 36) near 34
Polaris (PII 134) near 123
Planet Fitness (PLNT 33) near 31
Pulte Group (PHM 34) near 32.5
Red Hat (RHT 126) near 121
Spirit Aerosystems (SPR 99) near 90
ST Microelectronics (STM 25) near 22.9
Teledyne Technologies (TDY 191) near 180
Tyson Foods (TSN 80) near 78
Universal Display (OLED 207) near 170
Urban Outfitters (URBN 34) near 31.5
Wingstop (WING 44) near 40
YY Inc. (YY 136) near 115
Zendesk (ZEN 36) near 34.5