December 4, 2019

The averages are in recovery mode following some drama related to the U.S.-China trade talks and the possibility that a deal may not be reached until after the '20 election. Volume on the Nasdaq has been above average for 12 of the last 14 days, excluding the post-Thanksgiving half-day.

The speculative sentiment continues to percolate. One piece of evidence lies in the buoyancy of recent new issues, two of which are discussed below. Another plus for the current risk-on mode is the dynamic two-day move of Shopify (SHOP). While the stock does not present attractive entry, it is one that drives its way up the right side of a constructive pattern. It has been, and remains, the most important liquid glamour of any in the market. Its behavior speaks louder than any sentiment gauge.

Our big Focus List winner recently has been Allakos (ALLK). It vaulted 44% today on +702% volume after the biotech development company said it would entertain buyout offers. From our starter position’s pullback entry six sessions ago through today’s after-hours price, the gain is 59%.

Among the names, Amarin (AMRN) is a biotech expecting its first profit in ’20. Sales growth has accelerated from 44% to 67% to 91% to 103% in the most recent quarters. A 93 RS stock with a 97 RS group and a B- acc/dis rating.

After a 781% surge in just six weeks during September and October of ’18, price has been consolidating. It can be taken above the 24.67 high of Nov. 15. Note that the prior two breakout attempts of July and November have failed. Earnings expected Feb. 4 (unconfirmed).

Cloudflare (NET) is a recent new issue which came public in September at 15 and rose to as high of 22.08 in its first eight days of trading. Revenue growth has been strong and steady, at 48%, 49%, and 48% in the last three quarters. A 55 RS stock (owing to the time spent forming a cup pattern) with B- acc/dis rating.

NET forms a cup-with-low-handle and can be taken above the 19.80 handle high. Earnings expected Feb. 6 (unconfirmed).

Coupa Software (COUP) is expected to show earnings growth estimates of 72%/45% for the January ‘20/’21 fiscal years. Sales have expanded 54% and 51% in the last two quarters. A 97 RS stock with a D- acc/dis rating.

The stock can be taken above the 159.97 high of its seven-week consolidation pattern. Earnings expected Mar. 2 (unconfirmed).

Neogenomics (NEO) is forecast to log earnings growth of 22%/29% for ‘19/’20. Sales growth has been rapid and steady at 51%, 50%, and 51% in the last three quarters. A 91 RS stock with a B acc/dis rating.

Price forms a three-month cup-with-handle with 31% depth and 4.7% handle depth. It can be taken above the 26.48 handle high. Earnings expected Jan. 28 (unconfirmed).

Servicenow (NOW) is a large, institutional quality stock with 30% earnings estimates for ‘19/’20. Revenue has risen 32% in each of the last two quarters. An 82 RS stock with a B acc/dis rating.

Price forms a four-month consolidation. A two-week handle with a high of 284.30 can be used as a cheater entrance pivot. Earnings expected Jan. 22 (unconfirmed).

Novocure (NVCR) was a significant winner for us, up as much as 74% in just over two months after it was put on the Focus List June 12. Earnings per share are expected to move from an estimated 12-cent loss this year to a 38-cent profit next year. Sales have grown steadily at 41% and 42% in the last two quarters. A 98 RS stock with a B- acc/dis rating.

NVCR is forming a three-month cup-with-handle with 31% depth and handle depth of 12%. An entrance pivot of 96.14 (the handle high) can be used. Earnings expected Jan. 30 (unconfirmed).

Progyny (PGNY) is a recent new issue that came public at 13 five weeks ago, rising to a high of 29.29 in its opening three weeks. IPOs that advance 50%+ in their first couple of months of trading are favored. The fact that PGNY was able to rise 125% in its first three weeks, then, speaks.

Earnings are expected to jump from 8 cents a share this year to 29 cents next year. Revenue growth at the provider of fertility and family building benefits solutions was 115% and 120% in the two recent quarters. A 99 RS stock in an 80 RS group.

Technically, PGNY is two weeks into its IPO base. It can be taken above the pattern high of 29.29.

PTC Therapeutics (PTCT) is a biotech that is slated to post losses this year and next. Sales grew 24% and 33% in the last two quarters. A 92 RS stock in a 97 RS group with A- acc/dis rating.

Price broke out of a four-month cup on Tuesday, +4.9% on +88% volume. It sits 3% above its pattern high and can be taken above Tuesday’s high of 50.32. Earnings expected Jan. 28 (unconfirmed).

RingCentral (RNG) is forecast by Wall Street to book profit growth of 5%/15% for ‘19/’20. Sales grew 34% in each of the last four quarters. A 96 RS stock with a C+ acc/dis rating.

The stock forms an eight-week consolidation with 17% depth. It is 7% from its pattern high of 177.99, which can be used as an entrance pivot. Earnings expected Feb. 3 (unconfirmed).

Shopify (SHOP) has been one of two favored names for the past few years. It has the three things that define a liquid glamour: big estimates, high relative price strength, and very deep liquidity.

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 97 RS stock with a B- acc/dis rating.

Price forms a three-month cup. Yesterday the stock jumped 6.0% on +40% volume as the company announced Thanksgiving weekend sales soared 61% above the year-ago period. Today, it tacked on another 6.1% on +140% volume after Jim Cramer said he had heard of two companies showing an interest in acquiring the Ottawa, Canada-based company.

SHOP was mentioned in the Tuesday video for premium members but was not added to the Focus List. It is 9% from its pattern high and 6.6% above its October support level. It will be monitored for a more advantageous entry.

Yandex (YNDX) is a provider of Internet search/content services to Russia and a few other countries. Most on Wall Street look for 24%/44% earnings growth for the ‘19/’20 period. Revenue grew 39% and 40% in the last two quarters. An 82 RS stock with a B- acc/dis rating.

Price forms a four-month consolidation and can be taken above the 42.25 high of Monday. While the pattern appears unorthodox, note the Nov. 18 gap-up 12% gain on +338% volume. Also note the lack of worrisome profit-taking in the wake of that outsized gain. Earnings expected Jan. 24 (unconfirmed).

In sum, stocks remain in the driver's seat. The current pullback in the averages is viewed as healthy and necessary for a market that had gotten ahead of itself technically. While a few names were pressured during Monday's comedown, widespread breakdowns in leading stocks are not in evidence at this time. Let's continue to keep our eyes trained on the leading lights, as they will provide us with the best and timeliest clues as to general market health.

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.