April 10, 2019

A raft of the speculative growth-stock glamours perked up Wednesday, showing a resolve not seen in some time. While nothing bordering on the explosive, this nonetheless brought a few names into the actionable category, and they are discussed below.

The speculative sentiment, so necessary for the aggressive operator in the glamours, continues to percolate. This can be seen, among other places, in the growth-sector ETF's such as Global Robotics & Automation (ROBO), Prime Cyber Security (HACK), and Global X Social Media (SOCL).

Too, small-cap issues have outperformed over the past three weeks.

All of this maintains the glass half-full posture of these reports since early January.

Carvana (CVNA) is expected to post losses this year and next, however the trend is moving in a direction toward profit. Revenue growth has been explosive, at triple-digit rates during the prior four quarters. A 99 RS stock with an A+ acc/dist rating.

After more than doubling in about eight weeks, the stock builds a five-day handle. It can be taken above the 63.66 handle high. Earnings expected May 8.

Coupa Software (COUP) is anticipated to show a 61% decline in earnings (not a loss) for the January ’20 fiscal year and a 357% increase in the ’21 fiscal year. Sales growth has been solid at 43% and 39% in the two recent quarters. A 98 RS stock in a 98 RS group with a B- acc/dist rating.

COUP can be taken above the 100.00 high of its consolidation pattern on confirming volume. Earnings expected June 10 post-close.

Docusign (DOCU) shows about the largest estimates in the entire growth sector, 82%/85% in the January ‘20/’21 fiscal years. This is a steady-eddy business, with revenue growth at 37% and 34% in the recent two quarters. A 93 RS stock in a 98 RS group with a B- acc/dist rating.

After rising 64% from the Dec. 24 market low, the enterprise software specialist forms a three-week handle to go with its seven-month cup. It can be taken above the handle high of 59.26. Earnings expected June 13.

Etsy (ETSY) shows earnings forecasts of 16%/51% in the ‘19/’20 period. Revenue growth has accelerated from 25% to 30% to 41% to 47% in the four recent periods. A 98 RS stock with a B acc/dist rating.

Price is six weeks into a consolidation following an earnings-related jump. It can be taken above the 73.34 pattern high on confirming volume. Earnings expected May 27.

Mimecast (MIME) provides cloud security to corporations. It is predicted by the Street to show 85% earnings growth in the March ’20 fiscal year. Revenue has expanded 30% in the two recent quarters. A 94 RS stock in a 96 RS group with a C+ acc/dist rating.

Price builds an eight-week consolidation. Monday saw a shakeout that found support within three cents of its prior consolidation six months ago, as well as its 50-day line. The stock can be taken above the 51.66 high of its pattern. Earnings expected May 13.

Paylocity (PCTY) was discussed in the Mar. 31 report, the April 3 report, and Sunday’s report (“It can be taken above the handle high of 92.50”). The comment stands. Earnings expected May 8 post-close.

Shopify (SHOP) is forecast to grow net by 11%/107% in ‘19/’20. Revenue grew a beefy 58% and 54% in the two recent quarters. A 96 RS stock in a 98 RS group. The negative is a D acc/dist rating.

There have been three major distribution days in its four-week shelf pattern. The stock can be taken above the 209.59 pattern high, but only on confirming volume (at least 40% more than the average daily volume). Insisting on this level of volume assuages the concern of the lax acc/dist rating. Earnings expected Apr. 30 pre-open.

Svmk (SVMK) was analyzed in Sunday’s report (“Very aggressive players could take this above the handle high of 18.48, assuming confirming volume”). A 91 RS stock in a 98 RS group with an A acc/dist rating. Sunday’s comment stands. Earnings expected May 15 post-close.

Wix.com (WIX) was noted in Sunday’s report (“It can be taken above the handle high of 123.24”). The comment stands. Earnings expected May 22.

Workday (WDAY) was discussed in Sunday’s report (“The stock can be taken above the pattern high of 200.00”). The comment stands. Earnings expected May 30 post-close.

World Wrestling Entertainment (WWE) shows earnings growth estimates of 8%/160% for ‘19/’20. Revenue rose 29% in the current quarter, however in the past this measure has fluctuated from one quarter to the next. A 95 RS stock with an A- acc/dist rating.

Price appears to be putting the finishing touches on a six-month base. There have been several major accumulation days in the past three weeks. Indeed, Wednesday showed a clearing of a three-week handle, +3.5% on +82% volume.

WWE can be taken around Wednesday’s closing level of 94.20. This is less than 1% above the handle high of 93.68 and 3.6% off the 52-week high. Earnings expected Apr. 25 pre-open.

Subscriber questions

The following questions arrived from a single subscriber:

Q: Please comment on what the Volume in the Leaders and Indexes are telling us at this stage of the cycle.

A: Volume does not offer a message into health currently that is worth mentioning. Markets can rise for a while on slack volume before things become worrisome. We are not at that point.

Q: Are you concerned about the lower expected earnings for Q1 and its impact on the Leaders? Does the global slowdown forecast concern you? Do you think PE expansions got ahead of expected earnings and now we may see some more corrective action in the Indexes?

A: At some point in our trading careers, we all must make a decision to either pay attention to fundamentals or to technicals, as it relates to general market analysis. Judging by your questions, it seems you are attempting to combine technical with fundamental in your general market analysis.

A true technician believes that the three issues you bring up are baked into the cake. In other words, all opinions and predictions by all participants are reflected by today’s prices. You seem to be focused on the common talking points that folks are probably talking about on TV and in print.

While some of us have an intellectual curiosity as to the “backdrop” (interest rates, earnings, inflation, geopolitical, etc.) and how that might affect the future, it is believed that actually making buy/sell/exposure decisions based on anyone’s opinion or prediction (either yours or someone else’s) is a recipe for disappointment.

I might suggest that you focus on just the averages and leaders. Virtually everything else is noise, in my view.

Q: Does the Russell lag concern you?

A: The Russell 2000 divergence with the S&P began on Mar. 10, when the S&P printed a new high that has since been unconfirmed by a new high in the R2K. If this divergence extends for a few more months, it might be concerning at that point. Yet some breadth divergences have in the past lasted for one year-plus before the S&P topped. So they cannot be relied upon for intermediate-term timing.

My wish for you is that you shut off all the opinions and predictions in the media and focus only on the averages and leaders. It will simplify things and improve your effectiveness because you will be operating solely on the laws of supply and demand, which are fact and the truth.

It is all in the chart.

Kevin Marder

For intraday ideas and analysis: https://twitter.com/mardermarket

Unless otherwise noted, charts created using TradeStation. ©TradeStation Technologies, 2001-2019. All rights reserved.

The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by Thomson Reuters. Expected earnings release dates provided by EarningsWhispers.