The market continues to add some positives to its resume, with the major indexes tacking on decent gains (the S&P 500 is up about 0.8% for the week as we write this, with the Nasdaq up a bit more than that) and many individual stocks perking up. It’s another step in the right direction.
That said, we’ve still yet to see the market’s primary evidence (intermediate-term trend of the indexes; action of leading stocks) decisively turn up. The intermediate-term trend is effectively neutral right here, with (a) most major indexes stuck in the middle of their year-to-date trading ranges and (b) still below where they were five weeks ago.
Looking ahead, if the indexes can build on their gains next week, our measure of the intermediate-term trend will likely give the all clear. But to this point, the recent rally hasn’t done enough to offset the damage of the March/early April plunge.
As for individual stocks, it’s a similar story as the indexes. Has the action improved? Yes. Are many stocks setting up nicely? Yes. But have many lifted to new highs and run higher from there? No.
Of course, all of that is descriptive and not predictive—leading stocks could get going at any time, especially as earnings season kicks into gear next week. But until we see it happen, it’s best to continue to step lightly, picking your spots carefully on the buy side and keeping new positions on the small side, all while honoring your stops on the downside. We’re likely to leave our Market Monitor in neutral territory come Monday.
One more thing: Remember to keep your eyes peeled for what stocks and sectors are attracting big money (which is Top Ten’s specialty). Right now, we’re seeing many lesser-known, small- and mid-cap names perking up, even as some of the “older” popular sectors (like chip stocks) sag. That’s where your focus should be if this rally kicks into gear, though we’ll be watching earnings reactions for added signs of new leadership taking shape.
BUY IDEAS
BeiGene (BGNE 169) is a money-losing biotech that’s already had a big run this year—the type of stock you’d expect to be having some rough sledding. But instead, BGNE has not only remained resilient (north of its 25-day line) and has actually tightened up a bit in recent weeks. We’re OK nibbling here or waiting for a push over 177 to buy, with a stop in the mid 150s.
Energy stocks have turned very strong, though not that many have pushed out to new highs yet. One of them that has is Energen (EGN 67), which not only leapt to new highs above 60 late last month but has since shot as high as 69 on good volume before easing lower the past couple of days. Oil stocks are always herky-jerky, but we think dips to 66 or below would be tempting, with a stop back near the 60 area. Earnings are due out May 8.
Kirby (KEX 86) is another recent recommendation that’s broken out and followed through on the upside, with shares breaking out around 80 and running to 88 before pulling back a bit. Similar to EGN, you could buy a little here or on dips of a point or two, with a stop near the original breakout at 80.
Old Dominion (ODFL 149) isn’t the sexiest story but the chart has set up very nicely—after a persistent run that ended in January, shares have etched a few higher lows and are pausing just south of their highs near 152. You could nibble here or wait for a push to new highs, using a stop around 142.
Qualys (QLYS 83) shot out of its brief consolidation on Tuesday and is holding a couple of points above its prior high. Earnings are out on May 1, which is a risk, but we think a nibble on a dip of a point or two could work, with the idea of buying more should the stock react favorably to its quarterly report. A stop near 75 makes sense if you enter.
SELL IDEAS
For the second straight week, we have just one sell, which is another encouraging sign. Kohl’s (KSS 59) tripped its stop earlier this week and was sold.
We are, though, continuing to bump up our stops on many positions (see below).
SUGGESTED STOPS
Abercrombie & Fitch (ANF 27) near 24.5
Abiomed (ABMD 304) near 269
Baozun (BZUN 47) near 42
BeiGene (BGNE 169) near 154
BOFI Holdings (BOFI 42) near 38
Coupa Software (COUP 47) near 44
Fortinet (FTNT 58) near 52
GoDaddy (GDDY 65) near 58.5
Harris (HRS 169) near 159
HCA Healthcare (HCA 98) near 96
HubSpot (HUBS 114) near 104
Insulet (PODD 89) near 80
LGI Homes (LGIH 71) near 65.5
Loxo Oncology (LOXO 133) near 117
Match Group (MTCH 47) near 41
Michael Kors (KORS 65) near 62.5
New Relic (NEWR 76) near 69
Old Dominion (ODFL 149) near 142
PagSeguro (PAGS 37) near 33
Paycom (PAYC 116) near 104
Pegasystems (PEGA 62) near 59
Petrobras (PBR 14) near 13
Qualys (QLYS 82) near 75
Red Hat (RHT 160) near 146
Splunk (SPLK 106) near 94
TD Ameritrade (AMTD 61) near 57
Teledoc (TDOC 42) near 39
Twilio (TWLO 42) near 37
Veeva Systems (VEEV 74) near 69.5
W.W. Grainger (GWW 291) near 273
Zendesk (ZEN 49) near 45.5