It wasn’t a bad market until Thursday, when growth investors got slapped squarely on the side of the head. Apparently rising bond yields are to blame for the massive hiccup in the Nasdaq, but small-caps and mid-caps have also been hit hard recently.
Overall, except for the action of individual stocks that got caught in the undertow on Thursday, the situation hasn’t changed a lot. But what has changed is that the Cabot Tides indicator has turned negative, telling us that the intermediate term trend of the market is now down. And that means you should tighten the stops on the stocks you own and cut back on further buying.
This week, the portfolio lost a fair number of stocks that tripped our defensive stops. We have no way of knowing how long this pullback might last, and if it proves to have legs, how far down it might go. As always, it’s best to handle your holdings strictly on a stock-by-stock basis, taking what the chart tells you and acting decisively to cut losses short when necessary.
Making decisions in this kind of market is like driving at night. You can’t see very far ahead, so you need to be prepared to react to whatever shows up on the road in front of you.
BUY IDEAS
Greenbrier (GBX 62) broke out to new highs on Wednesday after a decent basing period. Volume has also lifted slightly, indicating some enthusiasm on the part of buyers. A nibble here, with a defensive stop around 56 could do well.
HCA Healthcare (HCA 140) has been following through well after its late-July blastoff, with a minor pause in September leading to a spike in volume on September 22 and further gains. A buy on minor weakness looks like a good risk/reward, with a loose stop at 125.
iRobot (IRBT 106) continues to consolidate in a narrowing range after an accelerated uptrend in August. A move above 115 would be tempting, with a stop near 100.
Jacobs Engineering (JEC 78) is trending up and hitting new highs, with volume clues providing positive reinforcement.
Rowan Companies (RDC 19) made a powerful move in September with volume ramping up to the stock’s high near 19 on September 24. The stock has relaxed under resistance at 19 for almost two weeks now, and any breakout above that would be a good sign.
SELL IDEAS
We have nine stocks that have tripped their stops and should be sold: BJ’s Wholesale Club (BJ), Carvana (CVNA), Chart Industries (GTLS), Guidewire (GWRE), Ingevity (NGVT), Inogen (INGN), PayPal (PYPL), Stitch Fix (SFIX) and Yext (YEXT).
SUGGESTED STOPS
Align Technology (ALGN 358) near 340
Alteryx (AYX 57) near 53
CF Industries (CF 55) near 51
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
Green Dot (GDOT 89) near 82.5
HubSpot (HUBS 152) near 142
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
Roku (ROKU 75) near 59
Seattle Genetics (SGEN 78) near 73.5
Semtech (SMTC 56) near 52
Square (SQ 100) near 83
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
Zendesk (ZEN 71) near 64.5