Please ensure Javascript is enabled for purposes of website accessibility
Top Ten Trader
Discover the Market’s Strongest Stocks

September 30, 2022

The week is shaping up to be down yet again for stocks, the sixth down week of the past seven, with every index basically re-testing their May/June low area (and some slicing to new lows). As of this morning, most major indexes were down in the 1% to 1.5% range for the week.

The week is shaping up to be down yet again for stocks, the sixth down week of the past seven, with every index basically re-testing their May/June low area (and some slicing to new lows). As of this morning, most major indexes were down in the 1% to 1.5% range for the week.

If you’ve been following the market’s trends, there’s really not much new to say or do—yes, there are headlines galore about possible blowups (U.K. debt is causing issues) and world events (potential sabotage of Russia’s pipeline), but the bottom line is the trends of the indexes, most sectors and most stocks are pointed down, with hundreds of stocks hitting new lows every day and very few bucking the trend. Thus, you should clearly be in a cautious/defensive stance as we wait for the sellers to run out of ammo.

Looking at secondary measures, there are tons of them reaching historic extremes, be it breadth, sentiment (surveys, money flows, options, etc.) or simply anecdotal evidence of people throwing in the towel. Two examples: Just 8% of NYSE stocks closed above their 50-day lines yesterday, while the AAII survey has shown two straight weeks of more than 60% bears (there’s only been a handful of 60% readings ever).

Because of that, we continue to think there’s a bunch of dry tinder out there for a big rally, if not a sustained upmove—the reasons for the decline and all the worries out there are very well known, as are the trades that are working (short stocks, short bonds, long the U.S. dollar, etc.), and the market rarely placates the majority for too long.

However, as we’ve written two or three dozen times this year: We need to see some of this dry tinder actually spark (buyers show up) before taking any real action. We’re not here to guess whether it will or won’t happen, but simply to be ready if it does.

In the meantime, there’s not much to do but to stay defensive and hold plenty of cash. Given the extreme selling, we wouldn’t be in a rush to sell wholesale, especially if you own a few names that are holding up well—but, again, that’s all within the context of having your overall portfolio in a safe place.

SUGGESTED BUYS

We’re not big on buying much of anything at this point; there’s nothing wrong with just watchful waiting. But at the very least the below names should be watched as they’re showing some solid relative strength.

Las Vegas Sands (LVS) looked cooked, but shares immediately bounced back on huge volume after Macau announced some loosening restrictions—which plays into the turnaround theme. The 41 area is still a wall, but if the market can stabilize and LVS can get above that, it could get going.

Livent Corp. (LTHM) hasn’t shown much big-volume selling as it’s retreated to its 50-day line. Yes, it could fail, but we’re not opposed to a nibble near here and a tight stop around 28.5.

Paylocity (PCTY) is a bit of a lone ranger in its group, which isn’t ideal, but the stock held its August low (near 230) and is still holding onto its 50-day line. A small buy with a tight (percentage) stop near 230 is one idea, or just watch PCTY for a strong move above 262 (and a stabilizing market).

SUGGESTED SELLS

Alteryx (AYX) – tripped stop
ATI Corp. (ATI) – relative weakness
Neurocrine Bio (NBIX) – tripped stop

SUGGESTED STOPS

Albemarle (ALB) near 250
Cameco (CCJ) near 25
Chesapeake Energy (CHK) near 89.5
Chipotle Mex Grill (CMG) near 1,500
Chord Energy (CHRD) near 128
Enphase Energy (ENPH) near 253
Evolent Health (EVH) near 33.5
Interactive Brokers (IBKR) near 61.5
Iveric Bio (ISEE) near 14.9
Karuna Therapeutics (KRTX) near 214
Livent (LTHM) near 28.5
LPL Financial (LPLA) near 210
Paylocity (PCTY) near 230
Pinduoduo (PDD) near 57.5
Regeneron (REGN) near 650
Tesla (TSLA) near 265
WillScot (WSC) near 38.5
Wingstop (WING) near 120
Wolfspeed (WOLF) near 99