This was the third straight week of tedious action for many leading stocks and general rotation into other areas of the market. Reflecting that, the S&P 500 is up about 1% on the week, while the Nasdaq is basically flat.
Overall, the major indexes look fine, though mixed—growth-oriented indexes (Nasdaq, small caps) are positive (still holding their 50-day lines) but not powerful (three steps forward, two steps back type of action). Other indexes, like the S&P 500 and Dow Industrials, have perked up nicely in recent weeks, lifting to new highs. All told, the intermediate-term trend remains up when it comes to the overall market.
When it comes to growth stocks, we’ve seen a lot of iffy action (repeated high-volume selling right off the top, lots of volatility after big runs), but not necessarily any clear negative action (breakdowns or gap downs, etc.). And the rest of the market is shaping up, with some lagging sectors finding buyers.
All told, September has been tricky, but the way we look at it is this: After big runs in leading stocks during August (and before that), the action this month has been acceptable so far. If it gets much worse (for growth stocks), the odds will increase that a correction/consolidation for that area of the market is underway. If, however, things hold firm and buyers show up, we think we could see another leg up as we head into earnings season next month.
As always, we just go with the evidence in front of us. Because of the under-the-surface action, it’s fair to be choosy when it comes to new buying and/or keep new positions smaller than normal. Holding a little cash also makes sense.
But with most of the evidence still positive, we’re holding our winners and trying to give them room to maneuver, knowing that the overall trend remains up.
BUY IDEAS
Autodesk (ADSK 153) gapped up out of a long base in late August, but like many earnings gappers of late, it then pulled back, testing its 25-day line this week. Yesterday’s big-volume rally, though, was encouraging—if you don’t own any, we’re OK buying around here with a stop near 140.
Exact Sciences (EXAS 75) has done a nice job of digesting its big Pfizer-induced gain in mid-August, bobbing up and down in a reasonable range on light volume during this month’s growth stock retreat. It could pull back further (maybe to the 25-day line, now at 71 and rising), but we like the action thus far—it looks buyable here or on dips, with a stop in the low 60s.
We’d have guessed Paycom Software (PAYC 153) would get taken apart during a growth stock selloff given its huge run since the start of August, but so far, it’s “only” pulled back to its 25-day line. A drop of another few points is certainly possible, but we think further weakness is probably worth a stab, with a stop near 135.
SELL IDEAS
We have five outright sells today: Darden (DRI 153), Horizon Pharma (HZNP 115), SiteOne Landscape (SITE 81), Splunk (SPLK 117) and Workday (WDAY 141).
And, not surprisingly, we’ve also added and bumped up a number of stops should the pressure on leaders continue.
SUGGESTED STOPS
Alteryx (AYX 59) near 52
BJ’s Wholesale (BJ 29) near 25.5
CarGurus (CARG 51) near 45.5
Carvana (CVNA 59) near 52
CenturyLink (CTL 23) near 20.8
Chart Industries (GTLS 75) near 73.5
Chipotle Mexican Grill (CMG 475) near 469
CF Industries (CF 53) near 48.5
Coupa Software (COUP 77) near 69
Cyber-Ark (CYBR 73) near 69.5
DSW Inc. (DSW 32) near 29
Etsy (ETSY 48) near 44.5
Greenbrier (GBX 60) near 57
Green Dot (GDOT 88) near 82
Ingevity (NGVT 105) near 96
Inogen (INGN 256) near 231
Lululemon (LULU 157) near 136
Michael Kors (KORS 73) near 70.5
MongoDB (MDB 81) near 66
Novocure (NVCR 49) near 40
Nvidia (NVDA 266) near 260
Okta (OKTA 69) near 56
PayPal (PYPL 91) near 84.5
Roku (ROKU 73) near 56.5
Seattle Genetics (SGEN 78) near 73
Square (SQ 86) near 77
Stitch Fix (SFIX 41) near 36.5
Teladoc (TDOC 77) near 63
Trex Corp. (TREX 80) near 77.5
Twilio (TWLO 85) near 71
Vertex Pharmaceuticals (VRTX 181) near 175
VFC Corp. (VFC 92) near 89.5
Wayfair (W 137) near 125
Yext (YEXT 25) near 22.5
Zendesk (ZEN 68) near 63.5