Housekeeping: Our offices are closed tomorrow for Good Friday, so we’re sending this (slightly shorter) update a day early. If you celebrate, have a great Easter, and we’ll be back at it as normal next Monday.
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The market’s on-again, off-again style remains in place, as after a couple of constructive bounce-back weeks led mostly by growth stocks, we saw a reversal of that in recent days, with the major indexes slipping, financial stocks becoming ragged again and many potential leaders getting hit hard.
The action isn’t pleasant, but your reaction to it should be related to your current stance. If you’ve been loading up on stocks and are heavily invested, yes, pruning makes sense. That said, if you’re already somewhat cautious (as we’ve been for a few weeks), we wouldn’t make any wholesale changes, at least not yet.
The reasons: First, not much has changed with the top-down evidence. It’s leaning negative (intermediate-term trend down, broad market iffy, financial stocks are a mess, etc.), but even the weakest major indexes are still above their recent lows, while big-cap indexes look halfway decent.
Second, for individual stocks, there has been plenty of slippage this week, and we’re watching carefully. That said, at this point, we haven’t seen much in the way of abnormal action—instead, the action has been more disappointing, with good-looking stocks that may have moved to new highs last week quickly turtling back into their prior ranges. Plus, there are still many growth-y names acting just fine.
Of course, this week’s rotation could just be starting—and if so, we’ll probably be tripped out of more names after another round of stop-tightening this week. All in all, we’re leaving our Market Monitor at a level 5, but how the market acts early next week will say a lot about the near-term (and possibly intermediate-term) future.
BUY IDEAS
As mentioned above, we’re seeing a fair number of stocks that are pulling back hard … but aren’t breaking any key support. Advanced Micro Devices (AMD) is an example, with shares dipping on low volume to their 25-day line here (and within our buy range from a couple weeks ago). We’re OK with a nibble here and a stop near the 50-day line (around 86).
Palo Alto Networks (PANW) is another example, with a stretch to new highs near 200 on Friday followed by a modest-volume retreat to the 25-day line—nibbling here or on further weakness with a stop around 180 seems like a good risk/reward.
Samsara (IOT) has admittedly been a bit sloppy of late, but the stock’s post-earnings-gap consolidation is normal given the huge early-year run. It’s lower priced and volatile, but a small bite here with a stop just under 17 is an idea.
SUGGESTED SELLS
Partial Sells
None this week.
Full Sells
Emcor (EME) – tripped stop.
Floor & Décor (FND) – the rejection at the century mark looks iffy to us.
PagerDuty (PD) – normally don’t sell this quick, but the immediate failed breakout is a red flag to us.
Super Micro Computer (SMCI) – later stage and starting to act abnormally.
WW Grainger (GWW) – tripped stop.
SUGGESTED STOPS
Academy Sports (ASO) near 55
Advanced Micro Devices (AMD) near 86
Cirrus Logic (CRUS) near 99
Dick’s Sporting Goods (DKS) near 135
DraftKings (DKNG) near 16.9
First Solar (FSLR) near 194
Five Below (FIVE) near 192
Globalfoundries (GFS) near 62
HubSpot (HUBS) near 377
Lennar (LEN) near 99
Natera (NTRA) near 50
Palo Alto Networks (PANW) near 180
Penumbra (PEN) near 257
TransDigm (TDG) near 698
