The post-Oct. 2 rally in stocks continues unabated as the Fed follows through on its September statement that it would add reserves to the system through Q1. As the chart shows, the Nasdaq has not closed below the key 20 ma line since the move began in early October.
Beneath the surface, our favored computer software - enterprise group continues to firm, with it now holding an 87th percentile RS group rank from O'Neil. Semiconductors remain in the upper reaches of the relative strength table as well.
With that said, there remains an overall dearth of pattern setups that are closing in on their entry pivot points. This is more the market being a victim of its own success than anything else.
In our Tuesday video session for premium members, we analyzed the components of the gold mining group to isolate which name or names might be targeted. The two that stood out from the pack are discussed below. It is important to recognize that the group does not always trend the way a leading growth stock might. However, when it does move, it is not always easy to establish positions with an attractive reward/risk ratio. Holding a name in this segment requires patience and a longer-term perspective than with other groups.
The two triggered trades in the gold group are SSR Mining (SSRM) and Franco-Nevada (FNV). While these have not yet set the world on fire, they have held their own in an otherwise-sideways market for gold stocks (not the gold spot price). Another, Kirkland Lake Gold (KL), was a triggered trade last June and worked out well before it formed a rolling top a few months later and eventually broke its 50-day line. Without big expectations and with a dose of patience, exposure to this group might make sense for certain subscribers.
Among the names, Anaplan (PLAN) is an enterprise software issue which came public 15 months ago at 17. It changed hands at a high of 60 last summer before consolidating since then. Most Wall Street analysts eye losses for the January ‘20/’21 fiscal years. Sales have grown strongly and steadily, up 46% and 44% in the last two quarters. A 92 RS stock in an 87 RS group with a B+ acc/dis rating.
The stock builds a six-month consolidation. It is buyable above the pattern high of 60.36. Earnings expected Feb. 20 (unconfirmed).
Barrick Gold (GOLD) is a Canadian gold producer with operations in Canada, U.S., and 11 other countries. The Street predicts earnings growth of 37%/29% for ‘19/’20. An 87 RS stock in an 85 RS group with a B acc/dis rating.
The stock forms a five-month, cup-with-handle base with 20% depth and an attractive 9% handle. The entry pivot is the 19.01 handle high. Earnings expected Feb. 12 (confirmed).
Cyberark Software (CYBR) is forecast to post 27%/7% earnings growth for ‘19/’20. Sales rose 29% and 28% in the last two quarters. A 92 RS stock with a B- acc/dis rating.
Today, CYBR cleared the handle of its six-month, cup-with-handle pattern on -23% volume before reversing shortly into the session and closing 1% below the handle high. The stock can be taken above today’s high of 142.67. Earnings expected Feb. 12 (confirmed).
Datadog (DDOG) is a recent new issue that jumped as much as 50%+ in its debut session in September. The enterprise software outfit is forecast to show losses for ‘19/’20. Sales increased 82% and 88% in the last two quarters. An 88 RS stock in an 87 RS group with a B- acc/dis rating.
The stock forms an eight-week cup-with-handle with 25% depth. It can be taken above the 43.52 high of the handle. This is a higher-risk issue with above-average volatility. Earnings expected Feb. 11 (unconfirmed).
Enphase Energy (ENPH) is the second-most attractive solar stock in the group, sporting a 99 RS rank (SEDG is believed to be the best solar name and was a triggered Focus List buy two weeks ago).
The Street eyes 790%/17% earnings growth for this year and next to go along with the 77% and 131% increases in sales in the past two quarters. ENPH holds a B+ acc/dis rating.
The stock forms a five-month cup-with-low-handle and can be taken above the handle high of 32.37. Earnings expected Feb. 25 (unconfirmed).
Qorvo (QRVO) is a semiconductor maker with earnings for the March ’21 fiscal year estimated to growth 18%. Revenue grew 12% and -9% in the last two quarters. A 96 RS stock in a 93 RS group with a B+ acc/dis rating.
Qorvo was one of the first two semis to convincingly advance out of the chute in early November. It gapped and jumped 20% on +589% volume on Nov. 1. Price forms a four-week flat shelf and can be monitored for its behavior following its earnings report expected Jan. 29 (confirmed).
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 86 RS stock in an 85 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 Feb. 13 (unconfirmed).
In sum, as has been the case recently, few pattern setups are available in the growth sector. This is a combination of the market being a victim of its own success + institutions' hesitation to aggressively target growth titles. Let's continue to play our strategy with the realization that a pullback in the general market would not be a surprise.
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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.