It’s a very unique market environment right now. When looking at the overall market, the intermediate-term trend is basically neutral now, with most indexes a bit above their 50-day lines but firmly in the middle of their six-week ranges. That could change next week if the major indexes hold their recent gains.
However, there are a ton of individual stocks (mostly growth stocks) that continue to act well. And they’re not just trading resiliently, but pushing higher on big volume day after day! Being out of gear with the overall market isn’t ideal, but there’s no question this type of persistent and powerful upside action is encouraging.
So what do you do with this mixed evidence? With the market still not in a confirmed uptrend and many of these strong stocks at far from decent entry points, you shouldn’t be going nuts on the buy side. Holding a decent chunk of cash makes sense in case the correction has further to run.
But you shouldn’t ignore the action we’re seeing across a wide range of names, either. If you’re holding a ton of cash (whatever that means to you), it’s fine to put some to work here. And if you’re buying extended stocks, keep positions small and use loose loss limits so you’re not kicked out on a normal shakeout.
Going forward, we’ll be looking for three things. First, of course, is an intermediate-term buy signal from the market itself. Second, to see if some of the super-strong growth stocks pull back or tighten up. And third, if the market does get going, to see if the buying pressures broaden out into some other areas.
All in all, we’re optimistic, with the unusual buying pressures on a wide swath of growth stocks boding well. But it’s important to respect the overall market’s stance and look for halfway decent entry points.
BUY IDEAS
Abercrombie & Fitch (ANF 22) gapped up to new high on earnings before sliding back a bit during the past two days. Retail hasn’t been very strong, but some are acting well and we like this setup. If you’re game, you can buy some here, albeit with a stop just below 20.
Charles Schwab (SCHW 57) has pushed to new highs this week on good volume; in fact, five of the past eight days have seen above-average volume up days. It could easily pull back a bit, but we’re game with a small buy here or on dips to 56, with a stop near 52.
Knight-Swift Transportation (KNX 49) gapped up on earnings in late January and has basically gone sideways since, with a low-volume dip to the 50-day line this week leading to a bounce. You can buy some here or on a move above 50, with a stop around 46.5.
Ligand Pharmaceuticals (LGND 177) has roared back to life, breaking out of a base-on-base formation this week on a string of big-volume days. We’re not opposed to buying some around here with a loose stop under 160, though pullbacks of a few points would be better.
SVB Financial (SIVB 271) is one of the first banks to hit new highs after a modest consolidation during the past few weeks. And, like many leaders, the recent push higher has come on a handful of good-volume days. You can buy around here with a stop near 245.
Twilio (TWLO 39) is one of many stocks showing very powerful action off a long decline and consolidation. It’s extended here, but the upside volume is enormous. Look for a dip of a point or two, with a loose stop in the 33 to 34 area.
Workday (WDAY 137) is part of the super-strong cloud software group, and after a brief shakeout on earnings near the end of February, the stock soared on four straight days of heavy volume before catching its breath during the past two days. You can buy a little here or (preferably) on dips, with a stop near the 25-day line (around 125).
SELL IDEAS
First off, don’t forget to bang out some partial profits if you caught a tiger by the tail recently. Paycom Software (PAYC 109) is a good example—the stock has surged from its early-February low near 80 to 110 today in nearly a straight line. If you own some, you could sell a portion and hold the rest with a trailing stop.
As for sells, we unfortunately got knocked out of Autohome (ATHM 90) earlier this week before it stampeded back to its highs. If you still own some, by all means hang on. But we’ll follow the system and list ATHM as a sell.
SUGGESTED STOPS
AbbVie (ABBV 119) near 107
Abercrombie & Fitch (ANF 22) near 19.9
Abiomed (ABMD 295) near 245
ASML Holdings (ASML 208) near 190
Charles Schwab (SCHW 57) near 52
Commercial Metals (CMC 26) near 24
Global Blood Therapeutics (GBT 54) near 53
Harris (HRS 157) near 150
Insulet (PODD 80) near 73
Knight-Swift Transportation (KNX 49) near 46.5
Kohl’s (KSS 62) near 59.5
Ligand Pharmaceuticals (LGND 178) near 155
LPL Financial (LPLA 65) near 61
Match Group (MTCH 44) near 36
MercadoLibre (MELI 413) near 355
Michael Kors (KORS 61) near 59
MyoKardia (MYOK 55) near 52
Neurocrine Biosciences (NBIX 92) near 81
Old Dominion (ODFL 147) near 133
Peabody Energy (BTU 39) near 38.5
Pure Storage (PSTG 21) near 19
Sage Therapeutics (SAGE 179) near 153
Steel Dynamics (STLD 46) near 44.5
Twitter (TWTR 35) near 29
Weibo (WB 138) near 125
Westlake Chemical (WLK 119) near 106
W.W. Grainger (GWW 282) near 248
Zendesk (ZEN 46) near 39.5