Overall, it was an OK week for the market, with the S&P 500 up around 1% and the Nasdaq flat-ish as we write this Friday morning. The intermediate- and longer-term trends of the indexes and most stocks (including leading stocks) are pointed up, so we remain mostly positive.
That said, there are a ton of crosscurrents out there, the most important of which are continued signs of rotation. Small- and mid-cap indexes have stagnated since mid-June, and many growth stocks have stalled out in recent weeks, with relatively few hitting new highs during the July upmove. Meanwhile, beaten-down areas like industrials, financials and even defensive areas like consumer staples have picked up steam.
All in all, right now it’s best to take things on a stock-by-stock basis—things that react well to earnings should be held (partial profits are fine, but we’d generally hold most of your shares), while things that trip your stop (on earnings or not) should be dumped. We have more than a few sells this week from Top Ten based on weakness.
On the buy side, we continue to see a decent amount of setups, though you have to pick your spots, as many still have earnings coming up in a week or two. We do expect to highlight some recent earnings winners in Top Ten during the next few issues, many of which look buyable following their gaps.
Looking ahead, we’ll be keeping an eye on the sub-surface market action—so far, many growth stocks and small-cap indexes have mostly stagnated (as opposed to broken down outright), but if we see decisive breakdowns in leading stocks and some indexes combined with continued buying of beaten-down areas, it would probably mark a change in the market’s character.
However, you know us—we don’t anticipate and just go with what’s in front of us. It’s not a raging bull market, but at this point, most of the evidence is still positive. We will probably nudge the Market Monitor down a notch on Monday depending on our weekend research, but we’re still tilted positive.
BUY IDEAS
Advanced Micro Devices (AMD 19) is part of the iffy chip group, but the stock’s been doing its own thing in recent months. And on Thursday, it popped to new highs after earnings, lifting out of a brief six-week base, its first since bottoming out in April. It gapped up again today due to a chip peer’s quarterly report, so buying a little down toward the mid 18s is an idea, with a stop near the 50-day line (near 15.5).
Coupa Software (COUP 64) has stalled out with many growth stocks since mid June, but its action has been very calm in its action, which is usually a good sign. The stock’s had a good run in recent months, so it could be susceptible to a correction, but shares offer a decent risk/reward here—if you’re game, you could buy here and use a stop around 58.5, which is a couple of points below the 50-day line.
Illumina (ILMN 303) is getting hit today with all growth stocks, but we like the pattern here—the stock easily thrust to new highs after its dip in late June, and today’s retreat is very normal. Dips toward 300 would be tempting, with a stop around 280.
Yext (YEXT 23) isn’t well known but the action has been pristine. Shares had a big rally from May (near 13) to mid June (near 20) before chopping sideways for a month. This week, the firm struck a deal with Amazon that caused the stock to surge higher on two days of excellent volume. Earnings aren’t likely out until late August, so we’re OK nibbling on dips of 50 cents or more with a loose stop in the mid 19s.
SELL IDEAS
We have a bunch of sells this week as stocks tripped their stop or flashed otherwise abnormal action. The following are now sells:
Abiomed (ABMD 377)
Align Technology (ALGN 356)
Carrizo Oil & Gas (CRZO 28)
Exact Sciences (EXAS 60)
iRhythm Technologies (IRTC 73)
Loxo Oncology (LOXO 166)
Shutterfly (SFLY 85)
Twitter (TWTR 35)
Urban Outfitters (URBN 44)
Willams Sonoma (WSM 59)
SUGGESTED STOPS
Chipotle Mexican Grill (CMG 472) near 440
Coupa Software (COUP 64) near 58.5
Dexcom (DXCM 96) near 93
Etsy (ETSY 42) near 38
Fortinet (FTNT 66) near 62.5
GDS Holdings (GDS 38) near 37
G-III Apparel (GIII 45) near 44.5
Grand Canyon Education (LOPE 118) near 113
Green Dot (GDOT 82) near 75
HealthEquity (HQY 79) near 75
Heron Therapeutics (HRTX 36) near 35
HubSpot (HUBS 130) near 127
Inogen (INGN 198) near 190
Keysight Technologies (KEYS 60) near 58
Kohl’s (KSS 73) near 70
Macy’s (M 39) near 36.5
Madrigal Pharma. (MDGL 279) near 255
MongoDB (MDB 62) near 51
Novocure (NVCR 34) near 33
Okta (OKTA 57) near 48
Palo Alto Networks (PANW 211) near 202
PayPal (PYPL 87) near 79.5
Serepta Therapeutics (SRPT 121) near 118
Shopify (SHOP 164) near 151
Spotify (SPOT 187) near 172
Teladoc (TDOC 65) near 56
The Trade Desk (TTD 91) near 84.5
Twilio (TWLO 62) near 55
Ultragenyx (RARE 79) near 74
Vertex Pharmaceuticals (VRTX 172) near 165
Weight Watchers (WTW 92) near 88
Wix.com (WIX 104) near 97.5
WPX Energy (WPX 19) near 17.9
ZTO Express (ZTO 21) near 19