The market continues to act just fine, with the major indexes generally trading in a tight range. Tight trading isn’t necessarily bullish; if it occurs after a multi-month run, it can be a clue to exhaustion in buying pressures. But coming so soon after an initial thrust out of a big trading range, it’s probably a sign that the sellers are out of ammunition.
Don’t get us wrong--up is better than sideways, and we’re certainly not ruling a brief pullback or shakeout in the major indexes.
A couple of other secondary indicators look encouraging today. First, it’s a positive that the market (and even financial stocks as a whole) is holding up despite a 20% drop in oil prices and some poor action from European banks. Two or three months ago, the market was obsessed with oil prices and the prospects of Deutsche Bank and Credit Suisse, but it appears the market is moving past those worries.
Second, we’re finally seeing some relative strength from growth-oriented indexes like the Nasdaq and S&P 600 SmallCap. Granted, some of that strength (from the Nasdaq anyway) is from mega-cap names like Microsoft and Apple, which don’t have excellent growth numbers. But from a big picture point of view, a rally is usually more sustainable when growth-ish indexes are leading.
As for individual stocks, earnings season is obviously having an impact, and we’re sure there will be some blowups along the way; we have a few sells this week (and some new, tight stops) on stocks that haven’t reacted well to earnings. But so far, most stocks and sectors are acting well, and we’re beginning to see more bullish reactions to earnings.
All in all, you should remain bullish. There will be the usual dips and consolidations along the way, but we suggest using weakness as a chance to buy.
Buy Ideas
Abiomed (ABMD 117) broke out soon after the Brexit turnaround and motored as high as 120 before pulling back. Now it’s trying to emerge from its dip to its 25-day line following earnings (which were out yesterday morning). ABMD could still wiggle around for a bit, but we think it’s a good buy around here with a stop near 105.
B&G Foods (BGS 52) pulled back to its 50-day line during the past couple of weeks, but exploded higher today after its earnings report crushed estimates. It’s not going to be a runaway stock, but we’re OK with buying some on this upmove, with a stop near 47.
CDK Global (CDK 58) has tightened up beautifully in recent days, right around its old high of 58. Earnings are due out next week, though the company has already pre-announced results. That doesn’t mean the report won’t cause the stock to move (the outlook is always important), but we think it’s OK to buy a half-sized position here with a stop near 55. And you could add shares on a decisive move above 60.
NuVasive (NUVA 62) had a bit of a shakeout on earnings, but held its 50-day line and has steadied itself. You could buy a little here with a stop near 58, and look to add shares on a push above 63.5.
Penumbra (PEN 68) blasted out of a tight area this week on big volume following some positive clinical trial news for one of its stent retrievers. Earnings are due August 9, but this breakout looks like the real deal, so it’s fine to take a position near here. Use a loose stop near 60 if you buy.
Universal Display (OLED 71) had a big-volume rally off its 50-day line following Apple’s positive quarterly report. OLED will report its own quarter next week (August 4), but the big-volume could be a positive clue. If you want in, you could buy a half-sized position around here with a stop in the mid 60s and see how earnings are received.
Sell Ideas
We are pruning our list a little this week with six recommended sells: Boardwalk Pipeline (BWP 16), Continental Resources (CLR 42), Match Group (MTCH 15), Sanmina (SANM 25), TransUnion (TRU 33) and Ultimate Software (ULTI 207). MTCH is a quick turnaround from our write-up just two weeks ago, but the stock failed to break out above key resistance near 16, and the earnings reaction, while not awful, probably caps the stock for the weeks ahead.
We also think taking partial profits in Gigamon (GIMO 44) makes sense, as shares have had a big run and surged on earnings early this morning (though it’s giving up some of those gains).
And here’s our latest list of stops:
Acuity Brands (AYI 263) near 251
Agnico Eagle Mines (AEM 58) near 49.5
Amazon (AMZN 762) near 695
AMN Healthcare (AHS 43) near 40
Barrick Gold (ABX 22) near 19.5
Big Lots (BIG 52) near 50
Boston Scientific (BSX 24) near 23
Credicorp (BAP 160) near 148
CyrusOne (CONE 54) near 52
Electronic Arts (EA 76) near 75
HD Supply (HDS 36) near 34.5
L-3 Communications (LLL 149) near 143
Masimo (MASI 53) near 51
Mobileye (MBLY 47) near 44
NOW Inc. (DNOW 18) near 18
Nucor (NUE xX) near 50.5
Newfield Exploration (NFX 54) near 40.5
Newmont Mining (NEM 42) near 37
Nvidia (NVDA 56) near 48
Oneok Partners (OKS 40) near 38.5
Parsley Energy (PE 28) near 25.5
Rice Energy (RICE 22) near 20
RSP Permian (RSPP 34) near 33
Silver Wheaton (SLW 28) near 23
Texas Roadhouse (TXRH 47) near 45
TransDigm (TDG 278) near 260
Universal Display (OLED 71) near 66
VCA Inc. (WOOF 71) near 66
Weibo (WB 31) near 28.5