Stocks are in good shape, as the averages have given next to no ground in the two days since Wednesday’s intra-session boost on comments from Fed Chair Powell. Further, at this writing on Sunday, the December Nasdaq future is +1.54% on optimism following U.S.-China discussions on trade.
Leading stocks act well, and without the failed breakouts in several names seen during the mid-November reversal to the downside by the averages.
Of particular note were a few growth stocks that were able to turn the corner of their patterns. These include The Trade Desk (TTM), Atlassian (TEAM), Splunk (SPLK), Okta (OKTA), and Tabula Rasa (TRHC). Four out of these five were not discussed in this report because they are a ways away from suitable buy points. However, they are all in the current watch list and represent a distinct firming in the speculative sentiment.
Among the names, Alteryx (AYX) is expected to post losses this year and next but has a 59% revenue growth rate in the recent quarter. A 98 RS stock.
The stock can be taken above the 63.18 level corresponding to the high of its original base. A stop could be placed just below the 60 round number which is also below the most recent swing high of 61.80. This represents about 5.2% risk, or de facto risk of 2.6% if using a junior starter position.
Caredx (CDNA) is expected to lose money in ’18 but become profitable in ’19. Sales grew 48% and 74% in the recent two quarters. A 99 RS stock. From its March low to its September high, the stock jumped 438%. More recently, its breakout was a fakeout, in tandem with several other leaders.
Now that the averages are on relatively firmer footing, CDNA can be taken above the base high of 30.15.
Chefs’ Warehouse Holding (CHEF) shows a 27% earnings growth estimate for ’19. This is not the most dynamic stock, as evidenced by three times in the last seven years earnings growth has declined from the prior year. It has always been profitable over the past seven years, however. Revenue grew at a pedestrian 11% in the recent quarter. A 98 RS stock.
The stock can be taken above its eight-week cup-with-handle high of 39.26.
(Ideally, one wants to be in companies with products and services that disrupt the status quo in their industry. This results in either big earnings growth estimates and/or hefty revenue growth. There are times during a bull market in which these stocks are not leaders, and therefore should not be purchased. The current phase is just such a time in the wake of October’s bulky markdowns in the vast majority of growth titles.
CHEF is not a name that was of interest earlier this year despite its 86% year-to-date showing. There were too many other growth issues that showed bigger estimates. However, things are different now, which explains the inclusion in this report and the watch list.)
Crocs (CROX) is a former growth stock that is now a turnaround story. Earnings growth is expected at 119%/134% for ‘18/’19. Revenue growth is just 7% in the recent quarter. This implies cost-cutting is driving the bottom line, not organic sales growth. A 99 RS stock under solid accumulation.
The stock staged a thunderous earnings-inspired breakout three weeks ago, +28% on +564% volume. Since then, price has hewed to an 11.8% deep range, printing two major accumulation days this past week as it sits just below the top of this three-week flag pattern. Price could be taken above the 28.20 high of this pattern.
Canada Goose Holdings (GOOS) is forecast to grow earnings by 28% in the March ’20 fiscal year. Sales grew 34% in the recent quarter. A 99 RS stock.
GOOS was one of the several names that failed to follow through on their mid-November breakouts. However, it never closed below the 20 ema, an important indicator of short-term trend. The stock can be taken above the 72.27 high of its current range.
Medpace Holdings (MEDP) shows a ’19 estimate of 15%, while revenue grew 62% in the recent quarter. A 98 RS stock.
Price is 5% from the top of its 10-week consolidation. It is moving up the right side of its base quickly and its RS line has already hit a new high ahead of price, a plus. It can be taken above the 65.09 base high, though hopefully it will pull back or ease prior to a breakout attempt.
Mongodb (MDB) should post losses in the January ‘19/’20 fiscal years. Despite this, the cloud database provider must be doing something really right because revenue grew 61% in the recent quarter, price more than tripled from its IPO price of 24 eleven months ago, and MDB earned a 99 RS rank.
Let’s wait until the Tuesday Dec. 4 post-close earnings report before considering entry.
Navigant Consulting (NCI) is a turnaround play with earnings growth expected to be 111% in ’19. Revenue grew just 4% and 1% in the recent two quarters. A 92 RS stock.
Price peeked above the top of its four-month consolidation on Wednesday, then pulled back. The preference here is to let price print at least a couple more sideways bars before considering entrance above Wednesday’s high of 26.10. This in light of the heavy-volume down day of Thursday, when volume was +107% and price was -2.6%.
Servicenow (NOW) is predicted by the Street to post earnings growth of 77%/33% in ‘18/’19. Revenue was a chunky 37% in the recent quarter. An 89 RS stock.
Despite the 89 RS being below most watch list stocks, there has been notable accumulation, including two major accumulation days in the last three. Substantial outperformance since the Nov. 20 low in the averages.
A very aggressive player might use the 194.04 high of 11/7 as a cheater entrance. That is not the preference here as price is up seven of the last eight sessions. A pullback or handle might make this cheater entrance more attractive. Otherwise, the 206.29 high of the base can be used as a pivot.
The Trade Desk (TTD) should see earnings growth slow from an estimated 51% this year to 15% in ’19. Revenue growth has sizzled at 50% in the recent quarter. The stock reached the 425 level of mutual fund ownership in the recent quarter (400-1,100 funds seems to be a sweet spot). A 99 RS stock.
Price is about 10% from the top of a nine-week cup pattern. Attractive entry does not present itself but this is one worth watching.
Under Armour (UAA) should grow earnings by 59% in ’19, per the Street, but revenue was just 8% and 2% in the recent two quarters. A 96 RS stock.
The stock soared 28% on +544% volume on 10/30. Price is 3% from the top of its six-month base. It can be taken above the handle high of 24.58 on confirming volume.
In sum, stocks act well and speculators can take one or more pilot buys as the speculative glamours, while few in number after October's selloff, show tangible signs of firming.