December 29, 2019: Part II

Due to the New Year's holiday, there will not be a Marder Report this Wednesday, Jan. 1.


Paylocity Holding (PCTY) is one of the better actors in the enterprise software group, a group that jumped in RS rank last week. Estimates: 28%/22% for the June '20/'21 fiscal years. Sales grew 25% and 26% in the two recent quarters. A 95 RS stock in a 77 RS group with a B acc/dis rating.

The stock forms a four-week shelf with notable tightness over the past seven sessions, a plus. In particular, the weekly chart below shows an ascending triangle that appears ready to break. It can be taken above the 122.65 pattern high. Earnings expected Jan. 29 (unconfirmed).

The weekly chart puts things in their proper perspective, i.e. that this is a minor pullback that did not touch the 9-period line, whereas all prior pullbacks going back three years did.

Cardlytics (CDLX) holds the highest RS rank, 99, of any enterprise software name on the Watch List. It was on the Focus List in late October, two weeks ahead of its earnings report. For those who held a position in CDLX through earnings, it is up over 50%. Estimates: Losses expected in '19/'20. Sales rose 37% and 63% in the last two quarters. A 99 RS stock in a 77 RS group with an A acc/dis rating.

Price forms a three-week shelf. This is an aggressive setup due to its not being a five-week base or more. It can be taken above the pattern high of 65.43. Earnings expected Feb. 11 (unconfirmed). While three-week patterns are generally avoided, they are sometimes buyable following a volume-backed show of price power. In CDLX's case, six weeks ago price surged 43% on +607% volume. This, in combination with the recent strength of the enterprise software group, and the fact this is the leader in the group, makes this buyable.

The thesis here is that we want to be on top of what the leading enterprise software names do in coming days and beyond due to the jump they made last week. This means we want to be right there for the first ones to break out. This assumes the recent strength in the group continues.

After CDLX, the next two high RS names in the group are SHOP and MODN, both of which were Focus List buys that triggered. The next two are RNG and COUP, both of which are currently on the Focus List. The next two are PAYC, a Focus List buy, and PCTY, discussed above.