It’s been a low-volume but fruitful week for the market, with the S&P 500 (up about 0.8% on the week) and Nasdaq (up around 2%) both hitting all-time highs, along with a handful of other indexes. Even better, leading stocks of all stripes remain in favor, continuing the good vibes that have been in evidence since mid-August.
Short term, things do feel a bit giddy, both from some actual data (put-call ratios have declined markedly), from some contacts we have and from some charts—a few popular names (Amazon, Square) and many not-as-popular names are a bit out of trend on the upside.
That’s not some major red flag at all, and to be clear, not every measure of sentiment is rising rapidly—money flows into equity funds and ETFs have been barely positive during the past month even as the market has stretched higher, a good contrary sign.
Still, after a nice move, don’t be shocked if we see a bit of rotation or retrenchment at some point in the near term, and taking a little partial profit in a name or two that’s well above any support could make sense. Just a heads up.
Broadening our horizon, though, we remain mostly bullish and think the odds favor generally higher prices going forward for many of the reasons we’ve cited during the past couple of weeks—uptrends in the major indexes and leading stocks, an increase in the number of stocks hitting new highs and, impressively, a nice dry-up in the number of stocks hitting new lows, which is usually a good sign for the broad market.
All told, we’re likely to keep our Market Monitor at a level 8 (out of 10), meaning you should be heavily invested. A shakeout or pullback (if/when it comes) could provide some nice, lower-risk opportunities in some stocks that only recently got going.
BUY IDEAS
Chart Industries (GTLS 75) has simply marked time during the past month or so, which isn’t bad action given its prior run and the soggy action of oil-related names. Still, we like the setup—if you want to nibble here (with a stop near 70) you can, or just wait for a decisive push above 79 or so to enter, with a stop around 72.
Ingevity (NGVT 101) has tightened up nicely after a great run in July (including an earnings move), with its 25-day line catching up. The price-volume action has been great, too. We’re OK grabbing some around here with a stop near 92.
Roku (ROKU 60) isn’t a buy right here, but after news that Amazon might launch a competing channel, the stock has begun to pull back a bit after a big recent run. Keep an eye on it—if the stock can base out in the 60 area for a while, or possibly shake down a few points and rebound, it could provide an entry. So far, it’s handling itself very well considering the “big” competitive news.
The eye has come off of Wayfair (W 134) to some degree, which is a good thing in our view. The stock showed a persistent move to new highs in May and June, and its first dip to its 50-day line in July found support. Shares aren’t super powerful here, but they are at new highs, and short interest is high. Dips of a few points would be tempting, with a stop for new buyers in the mid-110s.
SELL IDEAS
We have three outright sells this week: Hi-Crush Partners (HCLP 11) and Turtle Beach (HEAR 23), both of which tripped their stops, as well as Keurig Dr. Pepper (KDP 23), which is in a persistent downmove during the past month.
Also, don’t forget to bang out some partial profits in stocks that have been running for a few weeks and are showing you solid gains—Advanced Micro Devices (AMD 25), Square (SQ 89), Stitch Fix (SFIX 40) and Trex (TREX 85) are all good examples.
To be clear, we’re not saying you should start peeling off shares from all of your stocks that are up, but lightening up on one or two will put some profit in your pocket and allow you to better handle the inevitable pullbacks and shakeouts down the road.
SUGGESTED STOPS
CenturyLink (CTL 22) near 19.9
Chart Industries (GTLS 75) near 70
Coupa Software (COUP 71) near 63.5
Darden Restaurants (DRI 116) near 108.5
Etsy (ETSY 49) near 41.5
Greenbrier (GBX 58) near 55.5
Green Dot (GDOT 85) near 79
Inogen (INGN 263) near 215
Lululemon (LULU 157) near 130
Michael Kors (KORS 73) near 68.5
MongoDB (MDB 71) near 58
Novocure (NVCR 45) near 36
Okta (OKTA 62) near 51
PayPal (PYPL 92) near 81
Roku (ROKU 60) near 51
SiteOne Landscape (SITE 90) near 85.5
Sonic Corp. (SONC 36) near 32.9
Spotify (SPOT 189) near 178
Square (SQ 89) near 74
Teladoc (TDOC 77) near 61.5
TransUnion (TRU 75) near 72
Twilio (TWLO 80) near 67
USANA Health (USNA 132) near 123
Vertex Pharmaceuticals (VRTX 185) near 171
VFC Corp. (VFC 92) near 88.5
Wayfair (W 134) near 115
Workday (WDAY 155) near 138
Zendesk (ZEN 69) near 61.5