It’s been a positive start to the year for the major indexes, with a little outperformance in the recently lagging Nasdaq, and a little underperformance in the recently strong small-cap indexes.
Despite the upmove this week, the indexes remain in the tight consolidations they began in mid-December as there remains resistance at Dow 20,000, Nasdaq 5,500 and S&P 2,280 (all are ballpark figures). In the short term, more wiggles wouldn’t be surprising, partly because early January is often volatile, and partly because there are signs of complacency among investors.
The bigger picture, though, is still in fine shape. The intermediate-term trend is clearly up, and we’re encouraged that, so far, the indexes haven’t given up much of their strong November/early December gains. (The S&P 500 has given up less than a quarter of its run, for instance.) And all indexes are still standing nicely above their 50-day lines.
Longer-term, there’s no problem, either, as the main trend remains up.
As for individual stocks, we’re encouraged by what we’ve seen so far in the New Year. Granted, it’s been just three-plus days, but of the stocks that had been setting up into year-end (either as pullbacks or as bases), we’ve seen a few emerge on good volume and hold their gains. That can always reverse, of course, but going with the evidence thus far, it’s bullish.
If we see more stocks and sectors emerge (especially growth-oriented stocks), we’ll likely bump our Market Monitor up further; conversely, if we see a couple of big distribution days, we’ll probably pare back a bit, thinking a longer consolidation could be in order.
But right here, the evidence hasn’t changed much—most stocks are either advancing or consolidating normally after solid thrusts higher. Thus, we’ll keep our Market Monitor at a level 8 (out of 10).
BUY IDEAS
Burlington Stores (BURL 87) had a huge-volume surge on earnings in mid-November, then faded grudgingly for five weeks through year-end. Now shares are finding some support above the 50-day line (near 82). If BURL can get above 90, you could buy some, with a stop around 82.5.
DeVry (DV 32) has calmed down with the market during the past three weeks or so, following a big post-election run. If you’re not yet in, we’re OK buying some around here with a stop near 28.5. Or you could wait to buy on a push above 33 and use a stop around 30.
Helmerich & Payne (HP 79) ran from 66 to 86 after OPEC decided to cut production, and has since backed off to 78 and tightened up. If you see a resumption of the uptrend—say, on a move above 81 or so—HP will be buyable, with a stop around 74.
Oshkosh (OSK 68) also rallied nicely in November and has since retreated slowly. Shares are finding support at their 50-day line—you could nibble here with a tight stop near 63.5, or wait for a push above 69 or so and use a stop around 65.
Financial stocks remain resilient, and Signature Bank (SBNY 150) is setting up well after its post-election romp higher. You could buy some around here with a stop near 141, or wait for a push above 155 or so (and use a stop near 145).
Square (SQ 15) still has some sold overhead to contend with in the 15 to 16 range, but we’re impressed with its uptrend since last July, and especially since the election, including SQ’s move to new recovery highs this week. It’s low priced and volatile, so keep positions relatively small, but we’re OK buying some here and using a stop a bit below 13.5.
Many steel stocks are still set up well after humongous advances post-election. Steel Dynamics (STLD 38) is showing signs of life—we’re not opposed to nibbling here with a stop near the 50-day line (call it 34.5), and look to add shares on a big-volume push above 40.
Transocean (RIG 16) is yet another pullback setup, and it’s showing signs of resuming its upmove this week, with some gains in good volume. You can either buy on dips toward the 25-day line (now at 14.9) and use a stop a bit below 13.5, or look for a surge above 16 to buy, using a stop a bit above 14.
SELL IDEAS
Both ICU Medical (ICUI 129) and Zayo Group (ZAYO 31) fell apart this week and broke below their stops. Both are sells.
Tailored Brands (TLRD 22) is still above its 50-day line, but the stock wasn’t able to follow through at all after its huge earnings gap in December, and is now eating into that gap. It’s not a horror show, but we think it’s best to cut the loss and focus on stronger situations.
SUGGESTED STOPS
Applied Materials (AMAT 32) near 31
Arista Networks (ANET 101) near 92
Burlington Stores (BURL 87) near 82.5
Cavium (CAVM 61) near 58
Eagle Pharmaceuticals (EGRX 80) near 73.5
FMC Technologies (FTI 36) near 34.5
Freeport McMoRan (FCX 15) near 13
HealthEquity (HQY 40) near 39
MasTec (MTZ 36) near 35
MGM Resorts (MGM 30) near 28
Nvidia (NVDA 103) near 93
Oshkosh (OSK 68) near 63.5
Patterson-UTI Energy (PTEN 29) near 26
PayPal (PYPL 41) 38.5
PDC Energy (PDCE 77) near 71
Quanta Services (PWR 35) near 32
RPC Inc. (RES 22) near 19.5
Spirit Aerosystems (SPR 60) near 56.5
SunCoke Energy (SXC 11) near 11
Take-Two Interactive (TTWO 50) near 48
TD Ameritrade (AMTD 46) near 41
Tesaro (TSRO 143) near 127
U.S. Silica (SLCA 56) near 51
Western Digital (WDC 71) near 62
XPO Logistics (XPO 44) near 41