It’s been a mixed week, with some good and some bad. On the positive side, many leading stocks have generally bounced in recent days, including a few that tested key support. That said, we’re still seeing degradation in the broad market—small- and mid-cap indexes have now fallen below their 50-day lines, and the market’s intermediate-term trend is mostly neutral.
Overall, our thought concerning the market is the same as last week: We’re seeing a decent amount of iffy action from the major indexes and leading stocks, but we’ve yet to see a rash of abnormal action, where selling pressures intensify and a bunch of leaders break down.
Thus, we remain generally bullish, but we’re open to anything in the weeks ahead, be it an intermediate-term correction for the entire market, a rotation out of growth and into cyclical areas (industrials, financials and the like) or a resumption of the uptrend for the indexes and leaders as we head into October. (Longer-term, we continue to believe the next major move is likely to be up.)
As for your portfolio, we’re fine cooling your heels a bit and letting the market show its hand—if things do get going, there should be a bunch of solid entry points as many names have consolidated for all of September (with a bunch more that have been base-building since June or July), so there’s no huge rush to jump the gun. Conversely, it’s important to have some stops in place in case the sellers take control, and holding a little cash on the sideline strikes us as a good move.
One last note: We wouldn’t spend a lot of time overanalyzing the news or every market move in order to find out what the next move will be. It’s impossible to know. Instead, just focus on having your plan in place (stops, loss limits, watch list, etc.) and react when the market shows its hand.
BUY IDEAS
Alison Transmission (ALSN 52) has finally started to pull back after a beautiful gap up in early August and persistent advance through last week. We think the first dip will prove buyable—if ALSN slips another point or so (the 25-day line is near 51 and rising), you can buy some with a stop near 48.
Ciena (CIEN 31) hasn’t done anything since its monstrous-volume earnings gap in late August, but that’s fine by us given the wobbles among growth stocks. If you own some, hang on, but if you don’t a move above 32 on good volume would be buyable, with stop around 29.
iRobot (IRBT 108) has consolidated all month after an accelerated uptrend in August. There has been some high-volume selling, so the stock is one we prefer to buy on the way up—a move above 115 would be tempting, with a stop near 100.
SELL IDEAS
We have five stocks we’re kicking to the curb today: CenturyLink (CTL 21), Chipotle Mexican Grill (CMG 457), Michael Kors (KORS 70), Trex Corp. (TREX 79) and Williams Sonoma (WSM 66).
SUGGESTED STOPS
Alteryx (AYX 57) near 53
BJ’s Wholesale (BJ 27) near 25.5
CarGurus (CARG 55) near 48
Carvana (CVNA 60) near 52
Chart Industries (GTLS 79) near 74.5
CF Industries (CF 55) near 49.5
Coupa Software (COUP 80) near 69.5
Cyber-Ark (CYBR 80) near 70.5
DSW Inc. (DSW 35) near 30
Etsy (ETSY 52) near 44
Greenbrier (GBX 60) near 57.5
Green Dot (GDOT 89) near 82.5
Guidewire Software (GWRE 102) near 96
HubSpot (HUBS 152) near 142
Ingevity (NGVT 103) near 97
Inogen (INGN 251) near 231
Lululemon (LULU 164) near 140
MongoDB (MDB 81) near 69
Nordstrom’s (JWN 60) near 57.5
Novocure (NVCR 53) near 41
Nvidia (NVDA 279) near 263
Okta (OKTA 71) near 57
PayPal (PYPL 89) near 85
Roku (ROKU 75) near 59
Seattle Genetics (SGEN 78) near 73.5
Semtech (SMTC 56) near 52
Square (SQ 100) near 83
Stitch Fix (SFIX 43) near 37
Teladoc (TDOC 84) near 66
Twilio (TWLO 88) near 72
Vertex Pharmaceuticals (VRTX 192) near 179
VFC Corp. (VFC 94) near 90
Wayfair (W 149) near 128
Yext (YEXT 24) near 22.5
Zendesk (ZEN 71) near 64.5