The major indexes have put together a positive week, with the S&P 500 up about 0.8% and the Nasdaq up around 1.6% for the week as we write this, mostly on low, late-August summer volume.
Despite the relatively small net movements, we’re encouraged by what we’ve seen during the past two weeks—many indexes have at least nosed into new high ground, including the small- and mid-cap indexes that had basically been range bound since mid June.
Even better, a lot of leading growth stocks have shown more positive action, including many that are setting up well after some sharp retreats in June/July; some that are pushing to new highs after early-stage breakouts and pullbacks; and a few earnings-induced breakouts, too. Encouragingly, we’ve seen a nice expansion in the number of stocks hitting new highs, while the number of names at new lows has dried up nicely.
On the other hand, we’re still not seeing the type of upside power we’d prefer, be it in the broad market (many sectors like industrials, financials, semiconductors and more remain stuck in the mud) or even the major indexes—the Nasdaq is still slap-fighting with 7,900, for instance, and it wouldn’t take more than a bad day or two to put most indexes back near their moving averages.
Still, as we said above, when looking at everything, we’re encouraged by what we’ve seen during the past two weeks. It’s not a perfect situation (it rarely is), so we still believe picking your spots and holding a little cash makes sense. But, while we’ll take a look this weekend when cooler heads prevail, we’re likely to bump up our Market Monitor another notch (to a level 8) next week.
From here, the two things we’ll be looking for are (a) the Nasdaq to join the party and (b) for the many stocks that have thrust higher during the past couple of weeks to either hold their gains or, of course, build on them. That would be another sign that the sellers are worn out and that the bulls are flexing their muscle.
BUY IDEAS
BJ’s Wholesale (BJ 29) has lifted to new highs out of a very nice IPO base. It’s not going to be the fastest horse, but we like the action and the newness of it. If you don’t own any, you can buy some here or on dips of a point or so, with a stop near 25.
Vertex Pharmaceuticals (VRTX 176) still hasn’t really broken out, but we remain intrigued by the tight, low-volume action during the past three weeks, which comes on the heels of its giant-volume rally in late June/early July. You could nibble here, but we’d really like to see a decisive move above 183 to pile in. A stop in the high 160s makes sense.
Workday (WDAY 151) nearly broke out in July, then had a huge shakeout, but now it’s showing tremendous power. The company does have earnings coming up (September 4), but barring a complete disaster, the big base and upside thrust bodes well. We’re game with starting a position on dips of two or three points, with a stop down in the mid 130s.
Zendesk (ZEN 66) didn’t etch a traditional consolidation during the past couple of months, but we like the action, with a couple of sharp shakeouts and then, after a nice earnings gap earlier this month, some tightness. And now shares are pushing to new highs. We’re OK buying some here or on dips of a couple of points, with a stop around 58.5.
SELL IDEAS
Our only sell this week is Madison Square Garden (MSG 297), which tripped its stop.
SUGGESTED STOPS
Chart Industries (GTLS 74) near 69.5
Coupa Software (COUP 71) near 62
Darden Restaurants (DRI 115) near 107
Etsy (ETSY 49) near 40.5
Greenbrier (GBX 60) near 55
Green Dot (GDOT 86) near 79
Hi-Crush Partners (HCLP 12) near 12
Inogen (INGN 246) near 205
Keurig Dr. Pepper (KDP 23) near 22.3
Lululemon (LULU 138) near 120
MongoDB (MDB 70) near 56
Novocure (NVCR 40) near 35
Okta (OKTA 59) near 50
PayPal (PYPL 90) near 80
Roku (ROKU 62) near 51
SiteOne Landscape (SITE 90) near 85
Sonic Corp. (SONC 35) near 32.9
Spotify (SPOT 193) near 177
Square (SQ 78) near 66.5
Teladoc (TDOC 76) near 61
TransUnion (TRU 74) near 71.5
Turtle Beach (HEAR 28) near 23
Twilio (TWLO 81) near 66
Vertex Pharmaceuticals (VRTX 176) near 168
VFC Corp. (VFC 91) near 88.5
Wayfair (W 129) near 112
Workday (WDAY 151) near 135
Zendesk (ZEN 66) near 58.5