Following this morning’s Turkish currency-inspired sell-off, the S&P 500 (flat this week) and Nasdaq (up 0.6%) are relatively unchanged for the week. Even so, we think it’s been an encouraging one for stocks, as we’ve seen a bunch of positive earnings reactions (including some new leadership emerge) and, before today, some indexes nose into new high ground.
All told, the longer-term trend is clearly up, and the intermediate-term trend is also tilted up. And we like that we’re seeing a good amount of two-month consolidations now—a lot of stocks (especially growth stocks) staged initial breakouts in the February-to-April time frame, ran up sharply into June, and have chopped around since. That leaves us with plenty of potential breakouts if things go well.
However, we’re not leaving our brains at the door, either. Net-net, the prior leading indexes (small and mid caps, plus the Nasdaq) haven’t done a whole lot since mid-June. The advance has been relatively narrow (even as the Nasdaq approached new highs in recent days, just 100 or so stocks did the same). And, on a day-to-day basis, the action has been very rotational and news driven (as with today’s Turkish-induced move).
All told, there’s still more positive evidence than negative evidence, and from what we see, things have improved nicely during the past couple of weeks. In fact, we’re likely to bump up our Market Monitor another notch come Monday’s issue.
But given the realities of the current environment, it’s important to be discerning—focus on fresher leadership that’s shown powerful accumulation, look for decent entry points and don’t be afraid to take some partial profits on the way up. And on the sell side, raise your stops a bit for stocks that have bounced back, and of course honor your stops should we see some more sloppy action going forward.
BUY IDEAS
Coupa Software (COUP 69) hasn’t had much of a pullback since getting going in February, so it certainly could take a rest. But after its latest dip to the 50-day line, the stock has bounced nicely to new highs on solid volume. You could buy a little here with a stop near 59 or 60. Earnings are out in early September.
Grubhub (GRUB 130) gapped out of a base on earnings before dipping sharply with most growth stocks at the end of July. It could still wiggle around, but the shares have stabilized and crawled higher during the past week—we’re OK starting with a small position around here or on dips, with a stop in the 115 area for new buyers. (If you already own some with a big profit, it’s fine to average up a bit, but use a looser stop around 100-105.)
Roku (ROKU 60) staged a powerful earnings gap yesterday, and impressively, is following through beautifully today despite the down market. While it appears extended, we like the power here—you could start with a small position around here (or on dips of a couple of points) and use a stop near the high of the earnings gap, near 52.
Spotify (SPOT 188) has been herky-jerky of late along with most growth stocks, but after a post-earnings dip, it held its 50-day line (near 177.5) a few times and, yesterday, bounced on solid volume after a deal with Samsung. You could buy some here or on a push above 190, with a stop near 175.
Square (SQ 72) has had a huge, huge run during the past two years, but it’s setting up again—after shaking out to its 50-day line (now near 66), the stock leapt on earnings, tightened up for a week and today is showing some accumulation. You could buy a little here or on a push above 73, using a stop around 65. (If you own it with a profit, a looser stop near 63 makes more sense.)
SELL IDEAS
We have two sell recommendations: Axon Enterprises (AAXN 61), which broke its intermediate-term uptrend this week after earnings, and Grand Canyon Education (LOPE 116), which tripped its stop.
SUGGESTED STOPS
Canada Goose (GOOS 56) near 52
Coupa Software (COUP 69) near 59
Energen (EGN 72) near 69
Etsy (ETSY 46) near 38.5
Green Dot (GDOT 84) near 77
Inogen (INGN 229) near 196
Keurig Dr. Pepper (KDP 24) near 21.7
Lululemon (LULU 129) near 119
Macy’s (M 41) near 36.5
MongoDB (MDB 62) near 52.5
Novocure (NVCR 36) near 33
Okta (OKTA 57) near 48.5
PayPal (PYPL 88) near 79.5
Roku (ROKU 60) near 47
SiteOne Landscape (SITE 92) near 84.5
Sonic Corp. (SONC 35) near 32.9
Spotify (SPOT 188) near 173.5
Square (SQ 72) near 63
Teladoc (TDOC 71) near 57
TransUnion (TRU 75) near 71
Twilio (TWLO 78) near 64
Vertex Pharmaceuticals (VRTX 175) near 166
Wayfair (W 123) near 107
Workday (WDAY 138) near 126.5
Zogenix (ZGNX 50) near 49