Stocks give a good account of themselves this week, all the more so with Friday's jobs report looming in the background. Nasdaq volume increased Wednesday, printing an indecision bar after the open and the close ended up about even. This has the look of quasi-churning on the chart. The charts of most glamours were not broken during last week's sell-off. That is the good news.
The averages continue in their extended manner, along with most speculative growth-stock glamours. This has placed a lid on the number of pattern setups that offer attractive technical entrance. As noted previously, and more recently in Sunday’s report, "...this will be remedied either by a larger pullback in the averages or by the glamours simply tacking on more time to their patterns in order to increase their attractiveness to the speculator in aggressive-growth titles."
As experienced players of this strategy are aware, a lull in new setups happens from time to time over the course of a bull market. It is normal and is part of the "deal."
Ehealth (EHTH) was noted in Sunday’s report (“EHTH can be taken above the pattern high of 67.44. A cheater entrance pivot exists at 65.00, but is not preferred”). The comment stands.
Etsy (ETSY) is an Internet retailer specializing in handmade goods. Earnings are predicted to grow 11%/53% in ‘19/’20. Sales growth has accelerated over at least the past seven quarters. In the two recent quarters, it is up 41% and 47%. A 98 RS stock with a B+ acc/dist rating.
Like a number of issues, ETSY surged on its earnings report (+16% on +669% volume) and is now forming a four-week shelf as volume dries up for the most part over the past three weeks. The stock can be taken above the 73.34 pattern high.
Huya (HUYA) is the leader in e-sports content in China. The company live-streams gaming competitions, which is growing globally. The earnings outlook is 50%/71% for ‘19/’20. Sales are exploding at rates of 111% and 93% in the two recent quarters. Sequential sales growth was 18% in the recent quarter, the mark of a company in a serious growth phase.
Most of us probably do not favor stocks that are 47% from their high. They are usually less attractive due to the resistance that can act as friction on any advance. One stock that has grabbed my attention since May-June of last year is HUYA. Then, in the first five weeks after its IPO, it quadrupled.
New issues that move that much in their first five weeks, or even two months or more, are telegraphing signs of things to come. Usually. Not only are the HUYA estimates and sales blistering, but the estimate accelerates in ’20.
For those who favor stocks recovering from a mammoth decline like this one – but with an apparent rosy future – I am watching for a pullback entry. It is to be noted that the prime catalyst in the selloff is likely to have been the U.S.-China trade war, which has impacted all Chinese names.
Mimecast (MIME) is in the security software business. Earnings in the March ’20 fiscal year are forecast to jump 85%, while revenue growth is solid at 30% for each of the recent two quarters. A 95 RS stock in a 97 RS group with B- acc/dist rating.
After leaping 14% on +649% volume seven weeks ago on earnings, price has settled into an encouraging, 13%-deep cup. It can be taken on a clearing of the 51.66 pattern high. Hopefully, a handle or slight pullback will transpire to keep things honest.
Paylocity (PCTY) was discussed in Sunday’s report (“It can be taken above the handle high of 92.50”). So far this week, volume has dried up in positive fashion. Sunday’s comment stands.
Svmk (SVMK) operates the popular Survey Monkey software product. Per-share net is anticipated to go from -1.37 in ’18 to -0.07/0.06 in ‘19/’20. Revenue has been 18% and 19% in the two recent quarters. A 92 RS stock in a 99 RS group, the enterprise softwares, with an A acc/dist rating.
After vaulting as much as 67% on its first day of trading last September, the stock corrected about 50% in the bear market. Since then, it has traced most of what appears to be a large cup pattern. It is two days into a handle and can be monitored for at least a couple of more days of handle formation before an attractive entry presents itself.
When a title like Twist Bioscience (TWST) is included in these reports, it should be apparent that the supply of actionable titles is thin. The issue with TWST is liquidity, or rather the lack of it. The ADDV is just $1.5MM along with a $732MM market cap. Average daily volume is only 59,200 shares.
TWST has no earnings, but triple-digit sales growth over at least the last eight quarters. Sequential revenue growth was 37% in the recent quarter. A 97 RS stock with a C+ acc/dist rating.
This is a higher-risk issue, due in part to its being in the biotech industry. Price forms a lower-level cup. While it does not offer attractive technical entrance, it can be monitored for at least a few more days of handle formation.
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Q: Rally out of steam for now? Non-participation among stocks on my watchlist compared to the averages, laggards outperforming leaders (see AMD vs XLNX), & a low volume rally has me feeling very uneasy. Thoughts?
A: Agreed, though I do not feel "very uneasy." I have discussed this lull in recent Marder Reports, going back about four weeks, including this one. Of course, if you are truly feeling nervous, that is a sign of overexposure. Thank you for the question.
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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.