After a couple of generally constructive weeks, the sellers were back at it, with the S&P 500 (1.9%) and Nasdaq (2.5%) currently sitting with good-sized losses this week.
Stepping back a bit, there’s been plenty of movement from the market and individual stocks and sectors during the past month, from the plunge in late October, to the sharp seven-day rally, to the past week-plus of falling prices that included some high-profile blowups (like NVDA today). But through it all nothing has really changed—the market’s intermediate- and even longer-term trends continue to point down, so we continue to advise a defensive stance.
That said, there are some rays of light out there. Three weeks ago, for instance, there was next to no growth-oriented stocks that were in good shape; today there are probably a dozen or two that are, a sign that some names are beginning to resist the decline.
Moreover, the major indexes are holding above their October lows, and we’re finally seeing some real signs of investor discomfort (elevated put-call ratios, etc.) as people fear lower prices.
That said, we remain open to anything, and you should, too. It’s important to avoid preconceived notions of what the market can or can’t do going forward. At this point, the evidence remains negative, of course, but a few good days could actually result in an intermediate green light, which would prompt us to put some (not all) money to work.
Longer-term, history tells us that the odds of another severe (35%-plus) bear market is very low. But whether we bottom in a week or two or chop lower for three more months is anyone’s guess.
The point is to embrace the uncertainty and simply take it on a day-to-day, week-to-week basis. If we get some buy signals, we’ll come off the sideline; if not, we won’t. It really is that simple.
In the meantime, we’re focused mostly on monitoring the market for leadership ideas—as we’ve been writing for weeks, we’re OK with a small position here or there, but until the bulls take control, keep most of your powder dry.
BUY IDEAS
Cadence Design (CDNS 45) gapped up strongly on earnings in late October and has been very calm since, trading between 43.5 and 47 despite all of the market’s wiggles. You could buy a little here, or wait for a push above 47. A protective stop near 42.5 makes sense.
Omnicell (OMCL 71) was written about two weeks ago, but if you didn’t nibble then, we’re OK doing so now—the stock is holding up extremely well during the market’s latest slide, calmly sitting near the top of a 10-week base. If you buy some here, use a stop near 64, and consider adding shares on a powerful breakout north of 74 if the market turns healthy.
We remain impressed with Tesla (TSLA 353), which hasn’t had much of a pullback since reporting earnings in late October—there was one bad day on Monday, but the stock has been up since and is nearing its highest level since early August. We’re OK nibbling here or on dips, but use a loose stop in the 310 area if you buy.
SELL IDEAS
The market’s latest dip did knock around many names, with the following four tripping their stops:
Acadia Pharm. (ACAD 19)
Kirkland Lake Gold (KL 19)
Nordstrom’s (JWN 51)
Pacira Pharm. (PCRX 47)
SUGGESTED STOPS
Amarin Corp. (AMRN 18) near 15
Burlington Stores (BURL 163) near 160
Cadence Design (CDNS 45) near 42.5
Ciena (CIEN 33) near 30.5
Dine Brands (DIN 88) near 80
Eli Lilly (LLY 113) near 103
Exact Sciences (EXAS 70) near 62.5
GasLog (GLOG 20) near 19.2
Glaukos (GKOS 61) near 54
Guardant Health (GH 37) near 32
Intelsat (I 26) near 23.5
Jacobs Engineering (JEC 75) near 71.5
Mellanox Technologies (MLNX 93) near 85.5
MongoDB (MDB 81) near 68
Ollie’s Bargain (OLLI 90) near 83
Petrobras (PBR 15) near 13.5
Spirit Airlines (SAVE 52) near 48.5
Tractor Supply (TSCO 93) near 88
Under Armour (UAA 22) near 20.9
Vale (VALE 15) near 14.2
Verisign (VRSN 156) near 148