We’ll start with a housekeeping note: Our office will be closed on Monday for Labor Day, so your next issue of Top Ten will be emailed to you on Tuesday evening, September 6. Have a great long weekend and fire up a few burgers for us.
As for the market, this was the second week in a row that investors mostly bided their time until Friday, waiting for a key release (last week was Yellen’s speech; this week, the jobs report). Apparently investors liked what they saw in this morning’s report, with a good-not-great number probably keeping the Fed on the sideline for a couple more months.
That said, we’re focused on the market’s action, not the Fed. The good news is that action remains mostly positive—while the major indexes haven’t made much progress during the past four to six weeks, all remain above their intermediate- and longer-term moving averages. Thus, by our measures, the trends are up and the broad market in good health.
Of course, a new wave of selling is always possible, but we’ll simply say the onus is on the bears to prove they have the strength to break the uptrend. In other words, the odds still favor higher prices ahead.
That said, as we’ve seen with Top Ten stocks in recent weeks, individual stocks have been a mixed bag. We certainly haven’t seen any rash of breakdowns, but some poorly received quarterly reports, profit taking after big runs, and vicious sector rotation have cracked the intermediate-term uptrends of a few stocks.
Overall, though, we remain bullish, but it’s important to take things on a stock-by-stock basis. If something trips your stop or loss limit, you should be selling. And on the buy side, it’s probably best to be more selective in terms of buy points, at least until the major indexes resume their uptrend.
We’ll get a truer read on things when big investors return from the beach next week, but going with the evidence, we advise remaining heavily invested today.
Buy Ideas
Alibaba (BABA 99) is acting like a new liquid leader of the advance, with a modest pullback following its huge earnings advance, and now it’s testing resistance near 100. We think it’s buyable around here with a stop around 91 or so.
Align Technologies (ALGN 96) hasn’t had a consolidation in many months, which is a bit of a worry. But the stock did just pause for three weeks, retreated to its 25-day line, and is now trying to resume its uptrend. We’re OK with a buy here and a stop in the 88 area.
Mobileye (MBLY 50) has been all over the place during the past few weeks, but it held its 50-day line twice, had a great bullish volume clue last week, and looks ready to hit multi-month highs. You could nibble here with a stop near 45, or wait for a decisive move above 51 before buying.
Paycom Software (PAYC 51) has a very interesting pattern, with the stock trading in a 60-cent range during the past week on whisper-quiet volume. More important, the stock remains in a firm uptrend, holding above its 25-day line. You could buy a little here or on a push above 52, with a stop around 48.
Twilio (TWLO 56)
just began to settle down a bit, though by “settle down” we mean the stock “only” moves around a couple of points per day (as opposed to four or five points a couple of weeks ago). TWLO may need more time to set up, but if you’re game, you could buy a little around here with a loose stop around 48.5.
Wingstop (WING 31) has pulled back after its big earnings rally in early August, partly due to some sloppy action among retailers and restaurants. But the retreat looks normal to us, and has so far found support near the 25-day line. You can buy around here with a stop at the 50-day line (currently near 28).
Sell Ideas
We have eight stocks on the sell list this week: six tripped stops, one (LULU) just broke down on earnings today, and we’ve lost patience with another (CPRT) as the stock meanders.
The eight stocks are: Copart (CPRT 52), Five Below (FIVE 44), Lululemon (LULU 69), Martin Marietta Materials (MLM 182), Newmont Mining (NEM 40), Royal Gold (RGLD 77), Silver Wheaton (SLW 27) and Vulcan Materials (VMC 114).
Lastly, here’s our updated list of stops:
Acuity Brands (AYI 275) near 264
Beacon Roofing (BECN 46) near 45
Boston Scientific (BSX 24) near 23.5
CDK Global (CDK 59) near 56.5
Communications Sales & Leasing (CSAL 32) near 29
Copa Holdings (CPA 78) near 72.5
Electronic Arts (EA 83) near 77.5
HD Supply (HDS 36) near 35
Line Corp. (LN 42) near 40
Louisiana-Pacific (LPX 20) near 19
Masimo (MASI 59) near 54
Mobileye (MBLY 50) near 45
NetEase (NTES 214) near 196
Newfield Exploration (NFX 45) near 42.5
NuVasive (NUVA 66) near 61
Nvidia (NVDA 63) near 55
Penumbra (PEN 70) near 67
Physicians Realty (DOC 21) near 20.5
Pulte Homes (PHM 21) near 20.5
Silicon Motion (SIMO 53) near 47.5
Tata Motors (TTM 42) near 37
TransDigm (TDG 289) near 275
Twilio (TWLO 56) near 48.5
VCA Inc. (WOOF 72) near 68.5