So, officially, we’re still in the same boat as we’ve been in for a while—the primary evidence for the major indexes (intermediate- and longer-term trends are down) and most stocks (north of 80% of stocks are still south of their 200-day lines, and 65% are still below their 50-day lines) is bearish, so your primary goal should remain capital preservation.
That said, we think we’re pretty close to another “the next few days will be telling” situation: During the past few weeks, we’ve seen a few positive baby steps, such as growth indexes (which have been the “leaders” of the bear market on the downside, so to speak) showing some relative strength for really the first time all year; many growth stocks doing the same, with lows in mid-May; and, in recent days, a few names leaping above multi-month resistance. Of course, this all comes amidst horrid sentiment and fears of a recession, which is the exact environment that markets usually find a bottom.
What does it mean? Well, not much just yet—we’ve seen poor sentiment and breakout attempts once or twice before this year, with sellers re-emerging fairly quickly every time. Hence what we wrote above: The next few days/couple of weeks (especially as earnings season begins) should be telling, and if some of these nascent breakouts can stretch higher, and then if we see some legitimate green lights from our indicators, we’d have more evidence of a change in character. (As a heads up, for the intermediate-term trend to turn up, we’d still need to see either a few percent higher on the indexes or, more likely, another couple of weeks.)
Right now, then, we’re not advising any real change in stance; we’re leaving our Market Monitor at a level 3 and still think lots of cash and only small new positions make sense. That said, the market has put itself in position to finally change the script—keep your eyes open and let’s see if the sellers really have left the building.
SUGGESTED BUYS:
We’re not going to say the past few days have been like the good old days, but for the first time in months, we actually saw some eyebrow-raising action from some potential leaders.
To be clear: Breakouts have been low-odds plays this year, and we are not recommending you go out and buy a ton of these names. But if we are seeing a change in character in the market, some of these stocks could be starting runs. If you want to nibble, you can, but don’t go nuts and keep stops in place should the sellers re-appear.
Academy Sports (ASO) has set up a low-level base just below its 200-day line—a breakout north of 39 would be interesting, with a stop near 34.
Bumble (BMBL) popped above its 200-day line and resistance in the 33-34 area on good (not amazing) volume. If you want to nibble here or on dips of a point or two, with a stop around 28, you could.
Celsius (CELH) has ripped above resistance in the 72 area on superb volume. Volatility here is insane, but dips into the 75 area or even below would be tempting with a loose loss limit in the 15% to 20% range.
Enphase Energy (ENPH) is again testing resistance in the 210-215 area. Like some others, a clear, powerful breakout on big volume would be interesting. Note that volatility here is very high so if you enter now or later, use a loose stop.
Halozyme (HALO) boomed out of a five-week structure, which was part of a 16-month consolidation. We’re OK starting a position here with a stop in the low 40s.
Intra-Cellular (ITCI) remains in a tight range with resistance near 60. We like the action though, as always, would love to see something decisive on the upside to show the stock is ready to move.
It’s very jagged, but JinkoSolar (JKS) seems to have cleared the 65-68 area, which was resistance going back to last summer. Frankly, the stock is extended here, so we don’t have a great entry point, but let’s see if it can pull back or tighten up.
Neurocrine Bio (NBIX) has resistance near 100, which so far has rejected the stock. To be fair, there’s also resistance from last year up at 105, but let’s see if NBIX can decisively leap above the century mark in the days ahead.
SUGGESTED SELLS:
None for now—though we’ll likely prune a couple of names come Monday as we work to home in on the potentially strongest situations.
SUGGESTED STOPS
Dollar Tree (DLTR) near 151
Funko (FNKO) near 22
Nexstar Media (NXST) near 159
Scorpio Tankers (STNG) near 28.5
Ulta Beauty (ULTA) near 374