It’s been an interesting and, frankly, encouraging week on two fronts. The first is that the market has broadened out a bit—coming into Friday, the S&P and Nasdaq are flat-ish, but the broader indexes have pushed nicely higher, with small and mid-caps up 2% to 2.5% and equal-weighted big-cap indexes outperforming their weighted cousins.
More important to us, the intermediate-term trend of the market is turning up, with those small- and mid-cap indexes leaping to their highest levels since early March and standing safely above their 25-day and 50-day moving averages. It’s also a plus that the number of stocks hitting new lows has dried up nicely, another sign of broad market strength.
The second positive thing is the action of leaders—there was some rotation on Wednesday, which is rarely pleasant and did hit some strong names. But we didn’t see any major damage, and most leaders snapped back nicely. (A little more digestion is possible near-term, but overall the action is positive.)
Of course, even among these two points there are still some “buts” involved. The broader indexes, for instance, are still well short of their February highs, and overall these measures have “only” had three good days. And leadership, while expanding, still isn’t exactly gangbusters. We’d also note that we’re starting to see some sentiment measures pop (people are getting bullish), which, near-term, could lead to some further wiggles.
Those points are probably good reasons to put money to work in a step-by-step manner and not cannonball into the pool, and also to remember to take a few chips off the table (partial profits, etc.) if you’ve latched onto some winners.
But to be clear, we’re overall encouraged—we’ll likely push our Market Monitor up to a level 7 in Monday’s issue.
POTENTIAL BUYS
Intuitive Surgical (ISRG) isn’t going to be the fastest horse, but it’s traded fairly tightly in the low 300s for the past few weeks. We actually think you could buy some here with a tight stop just under the 300 area, making for a solid risk/reward situation.
SUGGESTED SELLS
Partial Sells
Exact Sciences (EXAS) gapped to new highs on earnings, chopped for a bit and now has stretched its legs. We’re OK letting a few shares go up here and trailing a stop for the rest.
Full Sells
Canadian Solar (CSIQ) – The many days of big-volume buying were immediately followed by many days of big-volume selling—and shares haven’t been able to bounce.
We’ll likely prune the list further come Monday, taking some profits here or there. In the meantime, we’ve updated and added some stops below.
SUGGESTED STOPS
Argenx (ARGX) near 386
Biogen (BIIB) near 296
Builders FirstSource (BLDR) near 107.5
DraftKings (DKNG) near 22
Duolingo (DUOL) near 137
Eagle Materials (EXP) near 156
GFL Environmental (GFL) near 35.5
GXO Logistics (GXO) near 56
HubSpot (HUBS) near 460
Intra-Cellular Therapies (ITCI) near 60
Intuitive Surgical (ISRG) near 295
KB Home (KBH) near 43.5
NexTracker (NXT) near 37
Penumbra (PEN) near 293
Rambus (RMBS) near 57
Spotify (SPOT) near 140
Take-Two Interactive (TTWO) near 128
Workday (WDAY) near 196
