Over the past few sessions, the averages have snapped back into place, as they once again occupy a spot above the 9 period exponential moving average. This week's Fed meeting is expected to result in a decision to stand pat on interest rates.
Subsurface, the action among leading stocks is good, but certainly not to be compared with what was seen in Q1. The difference is the market was coming off a mild bear in Q1, while the current situation is a recovery from a three-month, 8% correction. More names are expected to fill out their bases in the weeks ahead, with Shopify (SHOP), discussed below, a good example.
Among groups, the biotechs show scant signs of moving off their blistering pace begun in October. Part of their strength may be owed to a faster pace of drug approvals by the FDA.
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 91 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 sets up as a buyable pullback above Friday’s high of 22.51 with a suggested stop pivot of Thursday’s low of 21.68.
For breakout players, an alternative entry pivot would be the 24.67 high of Nov. 15. Note that the prior two breakout attempts of July and November have failed.
On or before Dec. 28, the FDA is scheduled to make a decision on expanded use of AMRN’s profitable drug for high-triglyceride patients. This is part of the stock’s risk, as is takeover speculation. Earnings expected Feb. 4 (unconfirmed).
Cloudflare (NET) is a recent new issue which came public in September at 15 and rose to a high of 22.08 in its first eight days of trading. Losses are anticipated this year and next. Revenue growth has been strong and steady, at 48%, 49%, and 48% in the last three quarters. A 46 RS stock (owing to the time spent forming a cup pattern) with C+ 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 94%/34% for the January ‘20/’21 fiscal years. Sales have expanded 54% and 51% in the last two quarters. A 96 RS stock with a D acc/dis rating.
The stock can be taken above the 159.97 high of its eight-week consolidation pattern. Earnings expected Mar. 2 (unconfirmed).
Palomar Holdings (PLMR) came public in April at 15 and is currently at 51.75. The diversified insurer is forecast to grow earnings by 126%/17% in ‘19/’20. Sales expanded 30% and 61% in the last two quarters. A 99 RS stock in an 87 RS group with a B- acc/dis rating.
Price pulled back last week along with the averages. It sets up as a buyable pullback above Friday’s high of 52.15 with a suggested stop pivot of Thursday’s low of 50.13. Earnings expected Feb. 3 (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 97 RS stock with a B- 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).
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. A 79 RS stock with a B acc/dis rating.
Price forms a five-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).
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 C+ acc/dis rating.
Price forms a three-month cup. Last Tuesday the stock jumped 6.0% on +40% volume as the company announced Thanksgiving weekend sales soared 61% above the year-ago period. The next day 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 forms a two-day handle 11% from its pattern high.
The last two days have shown constructive action as volatility contracts with volume dry-up. It is always possible that the stock takes off from here, but the preference here is to allow price to put in one or more days in forming the handle prior to setting a pivot price. Earnings expected Jan. 28 (unconfirmed).
Veracyte (VCYT) is a medical research company which is expected to record losses this year and next. Revenue rose 32% in each of the last two quarters. A 96 RS stock with a B- acc/dis rating.
Price forms a four-month consolidation with 36% depth. It can be taken above the pattern high of 31.18. Earnings expected Jan. 21 (unconfirmed).
In sum, the market's snapback from its recent pullback was impressive. Speculators should continue to add long exposure.
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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.