NOTE: Given our publishing schedule (50 issues a year), this is one of Top Ten’s “weeks off,” but we’re sending a Movers & Shakers update today to stay in touch, update stops and share our latest thoughts.
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The major indexes closed higher last week, but the overall theme remained the same from the past few weeks: Broader indexes did best, up 1.5% to 2%, while the Nasdaq and other growth-oriented measures lagged, up less than 1% in general.
Plus, for individual stocks, we’re still generally seeing selling on strength, with names having a rough time overcoming resistance (and if they do, staying there). Indeed, during this rally, the number of stocks hitting new highs on the NYSE and Nasdaq each peaked on November 1, despite most indexes cranking higher from there. Said another way, there’s not much “stock envy” out there, meaning names you don’t own that are simply running away on the upside.
That said, there are clearly pockets of stocks doing well, particularly defensive (including stable, steady growth) and yield-oriented stocks, some economically sensitive names (construction, industrial and some financial; many have been in Top Ten of late) and the occasional growth area (medical, etc.). And the longer the intermediate-term trend can remain up, the greater the odds that more sectors join the party.
Still, at this point, when you put money to work, these are obviously the places to focus on—though, given the environment, where few things are in persistent moves, it’s best to continue aiming to enter on dips and take some partial profits and/or selling on the way up.
Looking ahead, we feel like the next couple of weeks will be key; if the market can hold itself together and push higher, we think some of the repair work going on among growth stocks could lead to “real” breakouts—but, of course, should the market stumble (via Fed talk or simply long-term moving averages offering resistance), then we could be in for more repair work or worse.
That said, just going with what we see heading into the final month of the year, we’ll leave our Market Monitor at a level 5.
SUGGESTED BUYS
Chip stocks are still a mixed bag like so many growth industries, but Globalfoundries (GFS) has impressed us—not only did it flash huge-volume buying after earnings in early November, but it’s refused to give up any ground during the past couple of weeks, even when the market has had a hiccup. You could nibble here or on dips in the mid-60s, with a stop in the 58-59 area.
Impnj (PI) is thinner but looks great, holding all of its big earnings gap from late October and then, last week, nosing to new highs on solid volume. We still favor looking for dips (maybe into the 115 area—shares move around an average of six points per day so that wouldn’t be a giant move), but we like the action.
United Airlines (UAL) hasn’t set the world on fire, but it’s acted well and traded tightly since its earnings gap and rally in late October. The drop in oil prices could help goose earnings, too. We’re OK with a small position here and a stop near 40.
SUGGESTED SELLS
If you haven’t taken any partial profits on Gilead (GILD), we’d probably aim to do so soon—it looks great and has had a big move, but as a defensive growth name, a digestion phase is likely soon.
Outright sells:
Nucor (NUE) – looks fine, but taking a profit, and STLD looks like more of a leader in the same group. OK to trail a stop if you have some but we’re taking a modest gain.
SUGGESTED STOPS
Academy Sports (ASO) near 42.5
Amylyx Pharma (AMLX) near 32.5
Arch Resources (ARCH) near 146
Biogen (BIIB) near 272
Calix Networks (CALX) near 63
Chesapeake Energy (CHK) near 95.5
Matador Resources (MTDR) near 63
MedPace (MEDP) near 203
Neurocrine Bio (NBIX) near 110
Noble Corp. (NE) near 34
Patterson-UTI (PTEN) near 16
Regeneron (REGN) near 705
