December 22, 2019

Recent action in the Nasdaq, particularly Thursday and Friday, had the look of a mini melt-up. While this is obviously bullish, it should not be a surprise if the market comes in before long. At the same time, we are not in the business of predicting, so we will continue to act on those names becoming actionable.

Friday's volume in both the average and also individual issues should not be accorded much attention due to its being related to quarterly expiration of options and futures contracts.

The following table shows the Top 20 industry groups from MarketSmith. The highlighted groups are those that are attractive for momentum players. This explains the recent emphasis in the Focus List and these reports on semiconductor stocks.

Some recent IPOs are also included in this report. For the most part, these are very aggressive actors and should only be considered by like-minded speculators. On the other end of the spectrum, some less-aggressive issues in the form of larger semiconductor names are also discussed. These may not appear super-attractive at this juncture, but a mature bull market normally shows a rotation into larger issues over time. Having some exposure to these issues, as long as they come from leading groups, provides a form of diversification which may appeal to some subscribers.

Apple (AAPL) is a good example of this. It is up about 27% since it was placed on the Focus List three months ago as a pullback buy.

Among the names, Applied Materials (AMAT) is a bellwether among the semiconductor crowd. Most Wall Street analysts look for earnings growth of 24%/17% in the October ‘20/’21 fiscal years. Revenue growth has been -14% and flat in the last two quarters. A 96 RS stock in a 99 RS group.

AMAT forms a five-week pattern with a reasonable 13% depth. The stock can be taken above the 63.07 pattern high. This is considered a liquid glamour and may pursue a slower rate of appreciation than other names. With that said, there are times in any market cycle when the liquid glamours tend to outperform their smaller counterparts as large investors prefer perceived safety and lower risk. Earnings expected Feb. 13 (unconfirmed)

Bill.com Holdings (BILL) is a very recent new issue in the financial software space, having come public seven days ago. Due to the post-IPO blackout period, there are no analyst earnings estimates. Revenue grew 54% and 94% in the last two quarters. In particular, the most recent quarter showed a 40% jump in sequential revenue growth, a huge figure.

BILL is buyable for very aggressive speculators above the 38.50 high of Wednesday and Friday. An alternate entry is the 40.23 high of its third day of trading. A significant plus is the move of as much as 83% by its third day since going public.

Constellation Pharma (CNST) came public at 15 seventeen months ago and nearly took a quadruple when it peaked at 59.49 two weeks ago. The development-stage biotech interest shows losses expected for ‘19/’20 and has no sales. A 99 RS stock in a 99 RS group with a B+ acc/dis rating.

This is an especially volatile number and is only for very aggressive speculators. Ignoring the Dec. 9 price spike related to its announcement of a primary offering of stock, the Dec. 17 high of 47.50 can be used as an entrance pivot. Earnings expected Feb. 5 (unconfirmed).

Coupa Software (COUP) is forecast by the Street to notch earnings growth of 100%/31% in the January ‘20/’21 fiscal years. Revenue growth has been a robust and steady 54% and 51% in the last two quarters. A 96 RS stock in a 59 RS group with a C- acc/dis rating.

Coupa is not in the right group, but it performs better than most software, and especially enterprise software, titles. In the two months since the low of its consolidation pattern, it has scored one accumulation week and one distribution week. It can be taken as a cheater entrance above the 155.77 high of Nov. 27. Earnings expected Mar. 2 (unconfirmed).

Crispr Therapeutics (CRSP) is a development stage biotech company on the cutting edge of research. The two CRSP buy ideas mentioned on the Focus List, one a breakout from a cheater entry and the other a bread and butter pullback entry, were profitable.

No earnings are expected for ‘19/’20. Significant revenue materialized in the most recent quarter. A 98 RS stock in a 99 RS group with B+ acc/dis rating. Price builds a five-week flat base and can be taken above the 74.00 pattern high. For very aggressive players. Earnings expected Jan. 27 (unconfirmed).

Inphi (IPHI) is in the fabless semiconductor group. Most analysts eye earnings growth of 85%/31% for ‘19/’20. Sales rose 24% and 21% in the two recent quarters. A 97 RS stock in a 96 RS group with an A- acc/dis rating.

Price forms a five-week flat base with 14% depth and can be taken as a cheater entrance above the 75.78 high of Dec. 13. A less-aggressive alternate entry would be above the 77.67 pattern high. Earnings expected Jan. 28 (unconfirmed).

KLA (KLAC) is forecast to post earnings growth of 18%/12% in the June ‘20/’21 fiscal years. Sales increased 18% and 29% in the last two quarters. A 95 RS stock in a 99 RS group with a B- acc/dis rating.

The stock forms a four-week shelf with some pronounced distribution on the left side of this pattern. This has yielded to mostly accumulation days on the right side of the formation. Since the Dec. 3 reversal day in the averages, KLAC is up 13.5% vs. 4.8% for the Nasdaq and 4.1% for the S&P. Of the three semi equipment makers discussed in this report, KLAC has performed the best since the Dec. 3 session.

Price is 1.4% from the 179.95 high of its shelf and is buyable on a takeout of this level. Earnings expected Jan. 29 (unconfirmed).

Lattice Semiconductor (LSCC) shows earnings growth estimates of 76%/16% for ‘19/’20. Revenue was flat two quarters ago and inched up 2% last quarter. A 97 RS stock with a B acc/dis rating.

LSCC forms a three-month consolidation with 21% depth. It can be taken above the 21.58 pattern high. Earnings expected Jan. 28 (unconfirmed).

Luckin Coffee (LK) has just about doubled since its May public debut. Losses at the Chinese restaurant concern are anticipated this year and next, however revenue growth has been triple-digit in recent quarters. Sequential revenue growth was an off-the-charts 63% in the recent quarter and 86% in the quarter before that. A 97 RS stock with an A- acc/dis rating.

Price can be taken above the 33.58 high of Dec. 16. For very aggressive operators only. Earnings expected Feb. 12 (unconfirmed).

MKS Instruments (MKSI) is predicted to record earnings growth of -44%/42% for this year and next. Sales shrank 17% and 5% in the two recent quarters. A 94 RS stock in a 99 RS group with an A- acc/dis rating.

Price forms an eight-week flat base with an attractive 12% depth. It is buyable on a takeout of the 115.12 pattern high. Earnings expected Jan. 22 (unconfirmed).

Shopify (SHOP) is a unique growth stock due to its unusual combination of very large size (market cap: $44B) and rapid earnings growth. There are only so many stocks in the market with this combination. Institutions with a growth mandate only wish there were more names like SHOP they could place money with.

Earnings are expected to go from an estimated 50% decline this year to a 384% increase in ’20. Sales increased 48% and 45% in the last two quarters. A 98 RS stock with a B acc/dis rating.

Technically, price forms a three-month cup with 31% depth. It can be taken above the 409.61 pattern high. Earnings expected Jan. 28 (unconfirmed).

Solaredge Technologies (SEDG) is an Israeli producer of solar hardware such as inverter systems. The bottom line is forecast to grow 26%/17% in ‘19/’20. A 98 RS stock with a B+ acc/dis rating.

SEDG forms an eight-week cup with 23% depth, which is considered reasonable. Price is four days into the formation of a handle. The entry pivot is the 96.69 pattern high. Earnings expected Feb. 5 (unconfirmed).

In sum, the trend is up and the number of actionable issues has reached a peak level in our Focus List for the current move. A broad array of names, from recent IPO to group bellwethers, are actionable.

Kevin Marder

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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 a position in SHOP, 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.