January 26, 2020

Friday’s downdraft in the averages reflected the uncertainty related to the coronavirus's potential to damage the global economy. The market sees better than anyone, and we will let it tell its own story as to when it has this threat figured out.

Other markets have felt a flight-to-safety trade since earlier this month.

Elsewhere, the computer software - enterprise group maintained its firming tone last week, inching up to the 89 RS rank from 87 the week prior.

From a sentiment standpoint, tertiary names, such as recent hot IPOs, were mentioned as being a canary in a coal mine. Historically, it is these issues that buckle first when a market rolls over. We are seeing a bit of that currently, with Forty Seven (FTSV); XP (XP), a triggered trade 11% off its high in two days along with a failed IPO base breakout; and triggered trade Luckin Coffee (LK), 20% off its high in just four days after an MFE of 53% from entry.

Meanwhile, what with a few triggered trades this past week, the number of pattern setups has thinned to just three in this report and on the Focus List. Two of the three are in the gold mining group. Of the two discussed below, Barrick Gold (GOLD) is the slightly stronger stock vs. Wheaton Precious Metals (WPM)Franco Nevada (FNV), a triggered trade, is the best actor in the group, though it is unattractive at present.

Since the launch of this service, there have been two other periods in which the averages were in up trends with few pattern setups. Both resulted in a lack of upward progress in the averages and an eventual rollover. It will be of interest to see how well the indices and leaders perform in this, the third such phase.

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 89 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 89 RS stock in an 85 RS group with an A- 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).

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, the market is sorting through the potential for any effect the coronavirus may have on the economy. At the same time, the menu of pattern setups for the growth-stock speculator is the slimmest in months. The gold mining group has the two best setups currently.

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.