January 20, 2019

Stocks continue to give a good account of themselves, with the Nasdaq and S&P 500 crossing their 50-day lines this past week.

The market should be respected for what it just went through – a mild bear phase. Thus, expecting everything to just snap back to attention with powerful breakouts is not occurring just yet. As Bill said in possibly his first book, many leading names will build and break out of bases in the first 13 weeks after a follow-through day (FTD).

This would indicate the rally, just four weeks old – let alone a lesser number of weeks since the FTD – is young and should be given some time to produce explosive lift-offs.

Of course, it is important to become invested in the better actors as soon as possible once it appears an 8%-12% intermediate-term correction or outright bear market is over.

Some of the names that are showing a positive return since being mentioned in the Marder Report include Chegg (CHGG), Coupa Software (COUP), Dexcom (DXCM), Okta (OKTA), Twilio (TWLO), and Veracyte (VCYT). None of these have yet moved up 20%-25%, and neither have many other issues.

A determining factor for your attention should be which issues show major accumulation in their bases. A few that have include COUP, FRPT, HUBS, and INSP. When you examine the charts below, notice which ones have these telltale volume signatures. They show large-investor interest.

Meanwhile, so much of this game is doing one’s homework the evening before so that one knows exactly which names are on alert for the next day and can be inputted into your trading software as a buy alert.

Along these lines, as a pilot test, I will be producing more videos during the week which alert premium subscribers to what they might want to be aware of the following session. This will be a test, so it will not officially be part of the premium subscription, more of a bonus. Mainly, I would like to tighten up the communication between what I am seeing and thinking about entering, and what you are looking at. We’ll see how it goes.

Caredx (CDNA) is recovering from its downdraft of the week before last. 99 RS stock. A cheater entrance would be above the 1/9 high of 27.71.

Chipotle Mexican Grill (CMG) has a nice 40% estimate for ’19, though I am not thrilled with the single-digit sales growth of the recent quarter. Even so, the stock is a buy above the 530.68 pattern high. Earnings are expected Feb. 6.

Regardless of whether you entered on the cheater buy point as discussed in a prior report, Coupa Software (COUP) should be monitored for a pullback or handle before it gets to its base top of 84.53.

Cronos Group (CRON) came out of a six-week cup-with-handle Friday on +132% volume, making this a name to be accorded attention. It can be taken above the 15.30 high of 9/19.

Cyberark Software (CYBR) has an estimate of just 10% this year, but can be taken above the 84.21 high of 11/8, unless a couple of days of handle formation are printed. If that were to happen, CYBR could be taken above its handle high.

Domo (DOMO) is a recent addition to the watch list. It is in the right group (enterprise software), though a loss is anticipated for the January ’20 fiscal year. Sales grew 30% in the recent quarter.

While 27.10, the pattern high, would be the correct entrance pivot to use, the fast move up the right side of its base should be respected. Thus, some handle or pullback action should be awaited before initiating entry.

Etsy (ETSY) is attractive with its 42% estimate for ’19 and 41% sales growth in the recent quarter. While the pattern is v-shaped, it can nonetheless be taken above the pattern high of 58.30.

Five9 (FIVN) went nowhere after Friday’s cheater entrance was sold into on -3% volume. The 16% estimate for ’19 is not exciting, though 30% sales growth in the recent quarter improves things. This would be one to wait for the formal breakout above the 49.50 pattern high.

Guardant Health (GH) is a recent new issue that more than doubled in the opening fortnight. A loss is forecast for this year, but sales expanded 95% in the recent quarter. The 43.48 high of 1/11 can be used as a cheater entrance.

Freshpet (FRPT) has shown three major accumulation days this past week as it bounds up the right side of its base. It can be taken above the pattern high of 40.58.

Hubspot (HUBS) was discussed in the Jan. 13 report (“There is not enough accumulation in the base to suggest a cheater entrance above the 143.00 high of 12/3”). Price then pushed right past the cheater pivot amid two major accumulation days last week. The pattern high of 162.20 can be used as an entry pivot for aggressive players, i.e. without stopping for some handle work or a pullback.

Inspire Medical Systems (INSP) shows a loss forecast for this year, but sales growth has been blistering, at 80% in the recent quarter. Earnings are expected Feb. 5. The stock put in a couple of major accumulation days this past week.

Before entry above the base high of 57.87, price should be allowed to pull back, form a handle, or drift sideways.

Lululemon Athletica (LULU) is one to watch. The 17% estimate for the January ’20 fiscal year is not exciting, but sales growth has been steady, at 21% for the recent quarter. Nothing to do for the moment but let it put in some more time.

Paypal Holdings (PYPL) is a slower grower, what with earnings forecast to grow 20% this year. It is a liquid glamour, and can be taken above the pattern high of 93.70.

Pinduoduo (PDD) is a dynamic young Chinese Internet retailer with triple-digit sales growth and a move to profitability is expected this year. This can be taken above the 1/10 high of 26.70.

Elsewhere, Splunk (SPLK), Square (SQ), and Workday (WDAY) should be monitored, and the latter offers an entrance above the pattern high of 172.67.

In sum, emerging leaders in the growth sector continue to act well, with some showing notable volume. The titles showing 20%-25% gains post-breakout are very few and far between. This dovetails with the slack volume witnessed in the Nasdaq Composite. The momentum player should be wading back into the market with at least a few pilot buys.

Kevin Marder

For intraday ideas and analysis: https://twitter.com/mardermarket

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 positions in COUP, SQ and TWLO, though positions are subject to change at any time and without notice. Estimate data provided by Thomson Reuters.