February 16, 2020

This past week was a good one for our triggered trades. On Friday, for example, there were substantial moves in Dexcom (DXCM), +12.6%; Alteryx (AYX), +9.5%; Nvidia (NVDA), +7.0%; Cardlytics (CDLX), +5.5%; and Barrick Gold (GOLD), +4.2%; along with a 4.2% setback in Yandex (YNDX). 

It was gratifying to see one of the liquid glamours, Nvidia (NVDA), perform well. This company has two years of 20%+ earnings estimates ahead of it. It was one I was especially interested in squeezing into, given its longer-term potential. To wit, Nvidia is involved in a number of futuristic trends, including: AI (artificial intelligence), IoT (Internet of things), machine learning, virtual reality, accelerated computing, autonomous vehicles, robotics/automation, and, of course, gaming, where their 1999 invention of the GPU ignited the PC gaming craze worldwide.

While this service is all about the intermediate term (several weeks to several months, aka position trading) and secondarily about the swing timeframe, it is a bonus to be able to turn an intermediate term holding into a longer-term one. NVDA has that potential.

Two liquid glamours that the service has been watching are Adobe (ADBE) and Autodesk (ADSK). Paypal (PYPL), meanwhile, came out of a seven-month pattern on Friday. But volume was 13% below average and the stock is not of interest at the moment. Netflix (NFLX), discussed below, is another of the liquid glamours of interest. With substantial exposure to software names, holding one or more of these senior glamours can serve as a shock absorber in the event the current risk-on sensibility becomes less so.

Among the names, Coupa Software (COUP) is an enterprise software outfit with earnings growth forecast by the Street to be 100%/31% for the January ‘20/’21 fiscal years. Sales rose 54% and 51% in the last two quarters. A 92 RS stock in a 94 RS group with a C- acc/dis rating.

Technically, the stock forms a five-week flat base with an attractive 12% depth. It found support at its 50-day line and is buyable above the 174.27 pattern high. Earnings expected Mar. 16 (confirmed).

Model N (MODN) is an enterprise software issue with earnings growth estimates of 36%/23% for the September ‘20/’21 fiscal years. Sales were flat and +9% in the two recent quarters. A 95 RS stock in a 94 RS group with an A acc/dis rating.

The stock forms a seven-week cup with 15% depth. It sits 3% below the pattern high of 35.84 and can be taken above this level. Waiting for at least a few days of handle formation is preferred. This is a slightly thinner issue (ADDV $11.6MM), but passed the five-minute breakup test. Earnings expected May 5.

Mongodb (MDB) produces database software. Losses are forecast for the January ‘20/’21 fiscal years. Sales rose 67% and 52% in the last two quarters. A 91 RS stock with a B acc/dis rating.

Price forms an eight-month cup-with-handle base with 40% depth and 9% handle depth. It can be taken above Friday’s high of 174.33. Then, it crept past the 173.80 high of the five-day handle before closing below the pivot. Earnings expected Mar. 9 (unconfirmed).

Netflix (NFLX) shows earnings growth estimates of 44%/42% for ‘20/’21. Sales have steadied at 31% in each of the last two quarters. An 83 RS stock with an A-acc/dis rating.

Looking at the daily chart over the past 6-9 months does not tell the whole story. The weekly, however, shows price climbing toward the cheater entrance of a 20-month consolidation, a first-stage base. NFLX can be taken above the 385.99 high of May 1. Earnings expected Apr. 21 (unconfirmed).

Okta (OKTA) is a security software firm with losses anticipated for this year and next. Revenue growth, however, has been 49% and 45% in the recent two quarters. An 88 RS stock with a B- acc/dis rating.

OKTA forms a seven-month cup pattern and can be taken above the 141.85 base high which is 3% away. Earnings expected Mar. 5 (confirmed).

Progyny (PGNY) is a managed care company that should post earnings growth of 244% for ’20, per most Street analysts. Revenue grew 115% and 120% in the last two quarters. A 98 RS stock in a 71 RS group with a B acc/dis rating.

This recent new issue doubled in its first three weeks. It is the type of power that we pay attention to when it comes to recent new issues. The stock forms a four-week mini cup with a two-day mini handle. The past seven trading days have shown superb price/volume correlation.

PGNY can be taken above its mini-handle high of 34.88, however earnings are expected Mar. 4 (unconfirmed).

Square (SQ) shows earnings estimates of 66%/21% for last year and this year. Revenue rose 44% in each of the past two quarters. An 86 RS stock in an 80 RS group with an A acc/dis rating.

Price forms a 16-month consolidation following a 10x run in the prior two years. It can be taken above the 83.20 high of Aug. 1. This is considered a cheater entrance inside of the larger consolidation. Earnings expected Feb. 26 (confirmed).

Sunrun (RUN) installs and leases solar energy systems to residential customers in 22 states. Most Wall Street analysts eye earnings growth of 4%/138% for ‘19/’20. Sales increased 20% and 5% in the last two quarters. A 94 RS stock in a 93 RS group with an A+ acc/dis rating.

The stock has been working on a seven-month cup with 40% depth. It barely cleared the pattern high Friday before edging lower to close right at the line. Given its 32% run up the right side of the base in just 12 sessions, it is preferable to allow price to pull back and form more of a handle prior to entry. As well, earnings are expected Feb. 27 (confirmed).

Tesla (TSLA) is predicted by Wall Street to show major per-share earnings growth: 0.02/8.60E/15.24E for ‘19/’20E/’21E. Sales in the last two quarters were -8% and 2%. A 99 RS stock in a 99 RS group with an A+ acc/dis rating.

The stock forms a two-week pennant. For very aggressive speculators only, TSLA can be taken above the 818.00 high of Thursday. Higher potential risk, higher potential reward. Earnings expected Apr. 29 (unconfirmed).

Wheaton Precious Metals (WPM) is a precious metals streaming company, which is similar to a royalty company in that it does not own or operate mines themselves. Instead, it takes positions in miners. Earnings are forecast to grow 19%/56% this year and next. Sales grew -11% and 20% in the last two quarters. An 88 RS stock in a 77 RS group with a B acc/dis rating.

Price forms a five-month cup-with-handle with 19% depth and 10% handle depth. It is buyable above the handle high of 30.31. Earnings expected Mar. 11 (confirmed).

Zendesk (ZEN) is an enterprise software name with notable earnings estimate acceleration of 45%/69% for ‘20/’21. Revenue rose 36% and 33% in the last two quarters. A 78 RS stock in a 94 RS group with a B acc/dis rating.

Price forms a seven-month cup. It can be taken above the 94.89 high of its pattern. Earnings expected May 7 (unconfirmed).

Zoom Video Communications (ZM) came public in April and has nearly tripled since then. From what I have read, it is the most popular remote conferencing service, surpassing products like GoToWebinar. Earnings growth is expected to be 440%/11% for the January ‘20/’21 fiscal years. Sales grew 96% and 85% in the last two quarters. An 85 RS stock in a 94 RS group with an A- acc/dis rating.

Over a six-day stretch, the stock moved up roughly 33% before forming a two-week pennant. Very aggressive players can take this above Thursday’s high of 91.93. Earnings expected Mar. 4 (confirmed).

In sum, the subsurface action of this market has turned more favorable for our style of investing. This is most evident in the software titles and liquid glamours, both of which we have good exposure to, as well as the sheer number of pattern setups.

Kevin Marder

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Unless otherwise noted, charts created using TradeStation. ©TradeStation Technologies, 2001-2020. 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 no positions, 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.