WHAT TO DO NOW: Remain bullish, but continue to manage your positions. In the Model Portfolio, we’re going to again take partial profits in AppLovin (APP), selling one-third of what we have left. That will boost our cash position to around 22%. Details below.
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The major indexes are indicated to start relatively flat on the week after solid gains in prior days.
This message is primarily about AppLovin (APP), which has enjoyed a truly amazing run and is still in a steep uptrend—and remains a big position for us, which of course has been a good thing in recent weeks.
That said, given how extended the stock is, we’ve been looking at possibly taking some more chips off the table and we’re going to do that today. On Friday, the stock extended higher above round-number resistance at 400 before pulling back near the close—and today it’s likely to take a hit, supposedly because investors were disappointed the stock wasn’t added to the S&P 500 last week (which may have caused some of the sharp advance).
To be clear, a one- or two-day reversal at 400 or any other level doesn’t necessarily mean a huge correction is in the offing, but with APP still miles above any real support, with the stock up huge (even over the past week or two) and with the recent air pocket, we’re going to book another round of partial profits up here: We’ll sell one-third of what we have left (that is, one-third of our current position), booking a sizable gain and leaving us with a stake that’s closer to our “normal” position size. SELL ONE THIRD OF APP, HOLD THE REST
That will leave the Model Portfolio with around 22% in cash, though at this time, we’re not focused too much on our exact cash position—instead we’re taking cues from individual stocks on the buy and sell side. In the portfolio, we’re also watching Palantir (PLTR), which has been a huge winner, too, and is beginning to show some intermediate-term signs of euphoria (we’re holding what we have but could trim further), as well as Samsara (IOT), which was hit on earnings Friday but hasn’t violated any real support (still rated Buy at this time).
For now, though, the partial sale of APP is our only change and we’ll go from there.
We’ll have more details in tonight’s update. Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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