Last week, the major indexes and many leading stocks recovered off of key support, which was encouraging action. That said, it was also a holiday-shortened, low-volume week, so we were curious to see what would happen when more big investors returned to their office.
Happily, the buying has generally continued, with four of the five major indexes we track bouncing back to (or even slightly above) their June highs. (The NYSE remains the laggard of the group.) Just going with the evidence, the intermediate-term trend, which got iffy in late June, is pointed up, along with the larger, longer-term trend.
As for individual stocks, it’s still a bit tricky out there. On Thursday, even as the S&P 500 and Nasdaq nosed to new recovery highs, the number of stocks hitting virgin turf was far lower than in mid-June. On the NYSE, just 79 common stocks hit new highs yesterday, compared to 150-160 during the S&P’s June peak. It’s similar on the Nasdaq, with 111 stocks hitting new highs yesterday, vs. 200-plus in mid-June.
That said, we’re seeing a good amount of strength in stocks that are either beginning to come to life again after multi-month consolidations (Vertex, our Top Pick this week, is a good example) or rounding out bases that began a couple of weeks before the mid-June shakeout. Thus, while there remains lots of divergent action, we see plenty of good charts out there.
In sum, the evidence has continued to improve, and while there are certainly things to keep an eye on—the decline in new highs, and of course, earnings season is just getting under way—the path of least resistance remains up. Just don’t be surprised to see some curveballs and potholes, too.
We’re likely to nudge up our Market Monitor another notch come Monday, though it’s still important to pick your spots on the buy side, honor your stops and have a plan as earnings season ramps up.
BUY IDEAS
Etsy (ETSY 43) has admittedly had a big run since early February, so the stock might need a “real” correction/base-building effort. But the stock’s volume clue in mid-June (when it hiked prices and guidance) was enormous, and the stock has basically consolidated nicely since. You could start a position here and add shares on a move above 46. A stop just under 39 seems right. Earnings are likely out around August 8.
Heron Therapeutics (HRTX 39) has handled itself well since gapping up on positive news in mid-June. Of course, money-losing biotechs are always a tricky proposition, but if you don’t own any, we think you could start a position on a move above 40, with a stop around 35, and look to add shares if the stock continues higher from there.
Okta (OKTA 54) had a big advance from its breakout in February through its top in early June. But it basically held its 50-day line during its retreat, and showed some intriguing accumulation yesterday as it raced higher. We’re OK starting a position here with a stop around 47.5.
Spotify (SPOT 187) has been a real tennis ball, hitting new highs in mid-June, shaking out down to its 50-day line and then storming back to higher highs yesterday. It’s extended here and earnings are due out on July 26, so we wouldn’t plow in here. But dips of a few points would be enticing to get started. A stop around 167 makes sense if you enter.
ZTO Express (ZTO 21) changed character at the start of April, rising persistently and then bursting out of a long post-IPO base in May. It got hit late last month, but has bounced nicely off its 50-day line, forming a six-week consolidation. You could nibble here and look to add more on a push above 21.75 or so, with a stop near 19.
SELL IDEAS
On the sell side, we’re letting go of three stocks today: Cheniere Energy (LNG 63), Peabody Energy (BTU 45) and RH (RH 143).
SUGGESTED STOPS
Abiomed (ABMD 418) near 381
Chipotle Mexican Grill (CMG 459) near 433
Coupa Software (COUP 64) near 56.5
Dexcom (DXCM 102) near 91
Exact Sciences (EXAS 64) near 58.5
Fortinet (FTNT 67) near 61
GDS Holdings (GDS 44) near 36
G-III Apparel (GIII 44) near 42
Green Dot (GDOT 79) near 71.5
HealthEquity (HQY 80) near 72
HubSpot (HUBS 132) near 124
Keysight Technologies (KEYS 60) near 57.5
Kohl’s (KSS 70) near 68
Loxo Oncology (LOXO 182) near 162
Macy’s (M 37) near 35
MongoDB (MDB 57) near 48
Netflix (NFLX 401) near 362
Novocure (NVCR 33) near 29.9
Okta (OKTA 54) near 47.5
Palo Alto Networks (PANW 217) near 200
PayPal (PYPL 88) near 79
Serepta Therapeutics (SRPT 138) near 118
Shopify (SHOP 167) near 146
Shutterfly (SFLY 91) near 85
Teladoc (TDOC 67) near 53
Twilio (TWLO 61) near 52.5
Urban Outfitters (URBN 45) near 43
Weight Watchers (WTW 93) near 88
Wix.com (WIX 107) near 95
WPX Energy (WPX 19) near 17.6
ZTO Express (ZTO 21) near 19