April 24, 2019

What makes the markets so fascinating is their ever-changing nature.

Sunday's report spoke of playing light as a means of dealing with a slim menu of pattern setups. The next day showed some issues of interest turning the corner of their basing patterns. And then Tuesday made this turn all the more obvious, as all but perhaps three names on our 55-issue Watch List advanced on the session. A few recent breakouts such as OKTA and WIX moved to new highs as they emerged from pullbacks to logical support points such as the top of their prior base or their 20-day moving average line.

This short-lived sequence of events has helped the Focus List expand to include 16 members, the most in some weeks.

The Nasdaq, for its part, was not to be left out of the proceedings, putting in its most impressive showing in a month.

Otherwise, market health leaves little to be desired, other than a lagging small-cap sector. Defensive segments, the type that outperform when the speculative sentiment sours, lag. Leadership resides firmly in the technology and consumer discretionary sectors, two risk-on areas. And recent new issues perform well without the frothy behavior that can spell trouble ahead.

Among the names, Canopy Growth (CGC) is a Canadian cannabis producer. The company recently made waves by acquiring an American cannabis outfit subject to the U.S. lifting the federal prohibition on weed. A per-share loss is expected in the March ’19 fiscal year of -$1.18, followed by an improvement in the March ’20 fiscal year to a loss of -$0.33.

Revenue has been a robust 33% and 350% in the two recent quarters. A 96 RS stock with an A- acc/dist rating. CGC can be taken above the 51.81 high of its 11-week consolidation on confirming volume (at least 40% above the 50-day average of volume). Earnings expected May 16 (unconfirmed).

Docusign (DOCU) shows some of the highest earnings growth estimates of any company in the growth sector. For the January ‘20/’21 fiscal years: 82%/85%. Revenue grew quite steadily at 37%, 33%, 37%, and 34% in the last four quarters. A 92 RS stock in a 98 RS group with a C+ acc/dist rating.

Technically, the stock forms an eight-month, cup-with-low-handle. At 15%, the handle depth is just slightly more than the 10%-12% that is preferred, but still reasonable, especially for such a long and deep pattern. A break above the 59.62 handle high on confirming volume can be considered for entrance. Earnings expected June 13 (unconfirmed).

Jumia Technologies (JMIA) rose 3.2% Wednesday on increased volume from the prior day after our Tuesday evening private blog post. The post mentioned that some of the risk of the stock centered on not knowing the earnings date.

Today the company notified me that they will have a press release in early May detailing the date. This lowers the risk somewhat for those who hold a position. The stock does not provide attractive technical entrance at this time.

Ollie’s Bargain Outlet (OLLI) shows earnings estimates below the preferred 20% minimum (17%/17% in the January ‘20/’21 fiscal years). The stock was included here for a couple of reasons. Its group is non-tech (discount retailing) in a Watch List with 31 computer software titles out of 57 names total. So some diversification is helpful.

Second, price forms a long pattern (six months), and long patterns are often preferable to shorter ones. Regarding the earnings growth, it has a 4% annualized standard deviation over the past several years. This places it in rarefied company indeed: Very few outfits record this high of a level of stable growth.

OLLI is a 94 RS stock with an A acc/dist rating. It shows several major accumulation days along the right side of its base, a plus. Price actually cleared the high of its pattern on +74% volume Wednesday, rising to as high as 97.97 vs. the 97.61 pattern high, before closing at 97.21. OLLI can be taken above Wednesday’s high of 97.61.

Earnings expected Jun 25 (unconfirmed).

Pluralsight (PS) shows per-share losses of 0.28/0.11 for ‘19/’20. Sales, however, expanded by 42% in each of the last two quarters. A 94 RS stock in a 95 RS group with a B- acc/dist rating.

PS traces a seven-week consolidation with a 19% depth. This is acceptable for a pattern of this length. The stock can be taken above the 34.47 high of the pattern. Wednesday, this high was missed by a penny before sellers emerged to drive price lower. Earnings expected May 1 (confirmed).

Proofpoint (PFPT) is forecast by the Street to post earnings growth of 13%/37% for ‘19/’20. Sales increased 37% and 35% in the two recent quarters. A 90 RS stock in a 97 RS group with an A- rating.

The stock can be taken above the 129.00 high of its nine-month consolidation. Earnings expected Apr. 25 (confirmed).

Sea Limited (SE) was discussed in Sunday’s report (“It can be taken above its pattern high of 25.14. Earnings expected May 28 (unconfirmed”)).

Servicenow (NOW) shows earnings growth estimates of 25%/37% for ‘19/’20. Sales rose 30% and 34% in the two recent quarters. A 95 RS stock in a 98 RS group with a C+ acc/dist rating.

NOW released earnings after Wednesday’s close. It last traded at 256.00, just above the 251.65 high of its four-week shelf. The stock can be taken Thursday as long as it is within a 5% band of 251.65. This makes 264.23 the outer edge for a buy.

(It is recommended that entries be taken within 2%-3% of the pivot so that there is enough room for an add-on entry should price rise 2% or 3% after the starter position is entered.)

Svmk (SVMK) was noted in Sunday’s report (“It can be taken above the 18.48 handle high. Earnings expected May 8 (confirmed)”).

The Trade Desk (TTD) provides digital advertising services. Estimated net looks like this: -6%/29% for ‘19/’20. Revenue was a beefy 50% and 56% in the two recent quarters. A 99 RS stock with a B acc/dist rating.

Three of the last four earnings releases have generated hefty gains. The next report is expected May 23 (unconfirmed). TTD can be taken above the 214.70 high of its four-week shelf on confirming volume.

Twilio (TWLO) was analyzed in Sunday’s report (“TWLO can be taken above its 136.00 pattern high. Earnings expected Apr. 30 (confirmed)”).

Workday (WDAY) was covered in Sunday’s report (“The stock can be taken on a breakout of the 200.00 pattern high with confirming volume. Earnings expected May 30 (unconfirmed)”).

In sum, the market turned over a new leaf, or perhaps an old one, Monday and Tuesday, putting a kibosh on the preference to play lighter as was mentioned in Sunday's report. While we must continue to play things one day at a time in order to avoid complacency, the glamours' ability to perk up this week brightens things for the speculator in aggressive growth titles.

The only constant is change.

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 a position in JMIA, 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.