The market’s two-week rally has come to an abrupt halt in recent days, with the market sinking sharply on increasing volume. Most indexes did perk up above their 50-day lines earlier this week, but that’s been erased as the selling pressures intensify.
What does it mean? First, that the market’s correction, which started in late January, isn’t over. The intermediate-term trend is again pointed down, which argues for continued caution: keeping losses on a tight leash, holding some cash and limiting new buying.
On the positive side, leading growth stocks remain relatively resilient. That’s more descriptive than predictive, of course; good stocks can go bad in a hurry in a bad market. But we’re impressed that (a) many growth stocks have snapped back near or into new high ground during the past two weeks and (b) most of them are holding firm during this latest three-plus-day selling wave.
Sentiment-wise, we’d also point out that the latest reason for this decline (steel tariffs) is very well known and universally thought of as bad. Maybe it will turn out to be the news item that crystallizes bearish opinion in the days ahead.
All that said, you should do your best to keep your predictions in your back pocket. It’s not hard to find evidence that fits a preconceived notion, either bullish or bearish.
Instead, just take things on a day to day basis—right now, the sellers are in control, and it will take more than a couple of good days to turn the trend back up. Thus, play some defense and keep your Watch List up to date with potential leaders of the next advance, which will come eventually.
BUY IDEAS
Array Biopharma (ARRY 17) is speculative, but it shot to new highs on excellent volume near the market’s February low and has barely pulled back in recent days. Dips toward 17 are tempting (small positions only!), with a stop near 15.
BeiGene (BGNE 142) is another speculative biotech stock that’s acting well. It shot to new highs north of 160 last week but has since pulled back to the low 140s, and is still above its 25-day line. You could nibble here if you’re not yet in, but give the stock room as it’s very volatile; a stop down near 125 makes sense.
Five Below (FIVE 67) isn’t as strong as we’d prefer, and still has earnings to report (likely out in mid-March). But we’re mentioning it here because the stock has, if you can believe it, been trading very tightly after rallying the past three weeks. Keep an eye on it—if the market shows some upside power (big if) and FIVE gets above 68.5 or so, it could be worth starting a position given its intriguing action.
Netflix (NFLX 284) remains one of the top two big-cap growth stocks in the market (Amazon is the other). After ripping to new highs last week, the stock has pulled back modestly in recent days and remains well above its 25-day line. You could try to sharp shoot an entry on further dips to the high 270s, with a stop in the low 250s.
Shopify (SHOP 136) took a hit last week after a share offering, but it’s consolidated calmly since in the 133 to 140 area. Similar to most resilient growth stocks, you could nibble here on dips of a few more points, with a stop in the low 120s.
Twitter (TWTR 32) has basically been consolidating since a couple days after its big earnings gap in early February, with its recent downdraft modest in both price and volume. You can buy a little around here (or on dips of another point or so), with a stop near 27.
SELL IDEAS
We have four sells today, including a couple from poor action and a couple that tripped our stops: Century Aluminum (CENX 20), Lowe’s (LOW 86), Red Rock Resorts (RRR 32) and Snap Inc. (SNAP 17).
SUGGESTED STOPS
AbbVie (ABBV 112) near 106
Abercrombie & Fitch (ANF 20) near 19
Abiomed (ABMD 264) near 230
Autohome (ATHM 79) near 74
ASML Holdings (ASML 191) near 187
Charles Schwab (SCHW 51) near 49.5
Commercial Metals (CMC 25) near 23.5
Global Blood Therapeutics (GBT 58) near 52
Harris (HRS 151) near 148
Insulet (PODD 72) near 71.5
Kohl’s (KSS 64) near 59
Ligand Pharmaceuticals (LGND 157) near 148
LPL Financial (LPLA 62) near 60
Match Group (MTCH 39) near 34.5
MercadoLibre (MELI 376) near 345
Michael Kors (KORS 61) near 58.5
Neurocrine Biosciences (NBIX 82) near 78
Old Dominion (ODFL 136) near 130
Peabody Energy (BTU 41) near 38
Pure Storage (PSTG 20) near 19
Sage Therapeutics (SAGE 163) near 149
Steel Dynamics (STLD 47) near 44.5
Teck Resources (TECK 28) near 27.5
Twitter (TWTR 32) near 27
Weibo (WB 126) near 120
Westlake Chemical (WLK 106) near 103
Zendesk (ZEN 43) near 38.5