Simply put, the action of this week has been very encouraging. Stocks have had a lot of bad news thrown at them, from uncertainty with future Italian elections (and the possibility of leaving the euro) to similar worries in Spain (the prime minister just got voted out) to the flare up of trade tensions again yesterday (tariffs and retaliatory tariffs being bandied about).
Yet even coming into today, the major indexes were within 0.5% of unchanged, and this morning stocks are staging a good-looking rally.
More leading stocks, too, have started to stretch their legs, with many poking out to new recovery (or all-time) highs—it certainly feels like there are a lot of stocks that want to get going. To be fair, though, most are still swinging around with the major indexes on a day-to-day basis—up two points one day, down a point and a half the next, that sort of thing.
The question is whether this action, punctuated by today’s rally, is the upside follow-through we’ve been looking for over the past three weeks. Answer: It could be! Barring another reversal later today (or a good-sized drop early next week), we’ll likely be bumping our Market Monitor up a couple of notches into bullish territory.
That doesn’t mean you should expect a straight-up advance, or that you should let your guard down—many indexes and stocks still have a ton of overhead to chew through and we’d like to see a stream of breakouts from leaders going forward.
But it certainly looks like the evidence, which improved nicely in early May, has taken another step forward. Thus, it’s fine to extend your line, but don’t forget to continue to pick your spots, either on powerful breakouts from recent ranges or on dips after a thrust to new highs.
BUY IDEAS
Cheniere Energy (LNG 66) upped its long-term forecast this week, and that caused the stock—which broke out right after the market’s bottom in early May—to surge to new highs on excellent volume. It’s a bit extended, and the energy sector is taking a breather, but sharpshooting a buy on a dip of a point or two should work. If you enter, use a stop in the 60-61 range.
Chipotle Mexican Grill (CMG 438) gapped up on earnings and has basically gone sideways since then (with one brief pop to new highs in mid-May). Volume has been light, and the 25-day line (now at 429) having caught up. A push above 445 would be enticing, with a stop in the 410 area.
Continental Resources (CLR 69) broke out at 60 in early April, ran to 70, then was yanked down to its 50-day line (now near 64) during the sector’s retreat. Now, though, CLR has snapped back to its highs. Expect further volatility, but we’re OK buying some around here with a stop around the 50-day line.
Green Dot (GDOT 72) has now traded tightly for three weeks following its earnings gap to new highs in early May. You could buy some here, or look for a decisive move above 74, using a stop in the 69 area.
PayPal (PYPL 83) isn’t going to be the fastest horse, but after running from April 2017 through January 2018, it’s built a nice base with the rest of the market and is approaching key resistance. A push above 84.5 or so would be tempting, with a stop near 77. (If you currently own some, we’re keeping our stop in the mid 70s.)
Zendesk (ZEN 57) broke out at the start of the year, went sideways during the market’s March-April slog, busted to new highs as soon as the market perked up and has now gone tight for four weeks—all action that suggests the buyers are in control. You can nibble here with a stop around 51.
SELL IDEAS
Here’s your periodic reminder not to forget to book some partial profits on the way up. HealthEquity (HQY 75) is a nice candidate, as the stock has been running nicely higher for two straight months and is extended to the upside—consider selling a portion of your shares, while holding the rest for what hopefully will be a longer-term gain.
As for outright sells, we have four: Abercrombie & Fitch (ANF 22), First Solar (FSLR 67), Guess (GES 20) and Interactive Brokers (IBKR 73).
SUGGESTED STOPS
Abiomed (ABMD 398) near 335
BeiGene (BGNE 202) near 172
Cheniere Energy (LNG 66) near 60.5
Continental Resources (CLR 69) near 63
Coupa Software (COUP 54) near 49
Ecopetrol (EC 22) near 20.5
Energen (EGN 66) near 64
Fortinet (FTNT 62) near 56.5
GoDaddy (GDDY 73) near 66
Insulet (PODD 95) near 86
Integra LifeSciences (IART 65) near 60
Melco Resorts (MLCO 32) near 30.5
Netflix (NFLX 358) near 320
Nutanix (NTNX 55) near 50
Oil States Int’l (OIS 36) near 34
Okta (OKTA 58) near 44.5
PayPal (PYPL 83) near 75.5
Phillips 66 (PSX 119) near 109
Red Hat (RHT 167) near 158
RingCentral (RNG 77) near 69.5
Semtech (SMTC 49) near 43
Splunk (SPLK 114) near 101
Teladoc (TDOC 51) near 44
Transocean (RIG 13) near 11.8
Twilio (TWLO 57) near 46
Urban Outfitters (URBN 43) near 39
Wix.com (WIX 89) near 82
Wildhorse Resources (WRD 27) near 24
WPX Energy (WPX 19) near 16.5
Zendesk (ZEN 57) near 51