It’s been another sour week for the major indexes, with all of them coming into Friday down in the 2.5% to 4.5% range. More important to us is that many of the intermediate-term and secondary positives of the past few weeks have vanished—the intermediate-term uptrend has cracked at this point, the number of stocks hitting new lows is elevated and our Aggression Index (growth vs. defensive stocks) is also off its green light.
To be fair, we still think individual, high relative strength stocks (not every stock, but on balance) are holding up better than the major indexes, but many of them did give up the ghost in recent days. All in all, we’re moving our Market Monitor down another notch to a level 4.
That said, we’re not out-and-out bearish here: Given the evidence of the past few months, we still see a good chance that the market is in some sort of bottom-building process, with the recent weakness leading to either a retest of the May/June lows or a sloppy few weeks as big investors reposition and look for some economic clarity.
Of course, we never argue with what’s in front of us, and we have another batch of sells this week as many stocks did trip their stop—with most intermediate-term measures turning sour, it makes sense to hold plenty of cash and be very selective on the buy side.
Our point, though, is simply to keep an open mind, as the action of the past few months isn’t out of character for a bottoming process, especially given the overwhelming bearishness we sense out there.
In a nutshell: Play defense and respect the recent weakness, but remain flexible as we see how this downturn plays out.
SUGGESTED BUYS:
Both Neurocrine Bio (NBIX) and PTC Therapeutics (PTCT) broke out of a low-level bases in early August after their earnings reports, made a bit more progress, and then began to consolidate—and both have remained very tight even as the market went up and (recently) down, setting up solid risk/reward opportunities. We’re OK taking a swing at either of them here, with stops near 99.5 for NBIX and 46 or so for PTCT.
Yes, WW Grainger (GWW) is a high-priced name, but the action is hard to beat, with a superb run from its correction lows near 440 all the way to new highs near 600, and with a reasonable dip to the 550 area so far. We think buying some here or on further dips with a stop around 515 sets up a decent trade.
SUGGESTED SELLS:
Outright Sells
BioMarin Pharm (BMRN) – tripped stop
CrowdStrike (CRWD) – tripped stop
Gitlab (GTLB) – tripped stop
Monolithic Power (MPWR) – tripped stop
Novanta (NOVT) – break down
Petrobras (PBR) – taking a profit
Pure Storage (PSTG) – cracked on earnings
SUGGESTED STOPS:
Albermarle (ALB) near 240
Alnylam Pharmaceuticals (ALNY) near 196
Alliance Res. Partners (ARLP) near 22.5
Arista Networks (ANET) near 112.5
CF Industries (CF) near 97
Chart Industries (GTLS) near 179
Consol Energy (CEIX) near 64
Enphase Energy (ENPH) near 240
Flex Inc. (FLEX) near 16.9
Lantheus (LNTH) near 75
Neurocrine Bio (NBIX) near 99.5
Onsemi (ON) near 64
Paylocity (PCTY) near 224
PTC Therapeutics (PTCT) near 46
Scorpio Tankers (STNG) near 36.5
Wingstop (WING) near 105