Pattern setups for base breakout plays have been in short supply for the past few weeks, and this has been noted in these reports and in the premium videos and Focus List. In addition, of those coming out of bases, fewer have shown good volume and convincing follow-through.
The issue has been that many speculative growth stock glamours are extended and currently only 2-4 weeks into fresh patterns. In a better market, some of these could be taken had they shown more power and better accumulation.
As a result, the game plan has been to tread lightly in this area, at the same time adding more swing setups. Thus far, this appears to be the correct approach for us to be taking. For example, TEAM and ZEN were discussed as ready to complete 4-4.5 week patterns, but more evidence was needed in order to simply trade the breakout.
Among others, ZS also came out of a seven-week pattern, but on average volume with limited follow-through. YNDX has attempted twice to break out of its constructive, three-month base but was turned back on average volume. CSOD, a Focus List name, broke out Tuesday, +2.2% on +110% volume but did not show much follow-through Wednesday. CMG, another Focus List name, came out earlier this week on average volume and is currently 0.8% below its pivot.
CHGG appears to show some potential as it broke out Monday on big volume, then set up Tuesday for both a swing and a position trader entry. These setups were discussed in the Tuesday evening video and Focus List.
I do not consider AMZN and FB to be true market leaders, and thus they were not on the Focus List despite their appearing to be on the verge of clearing longer basing patterns. They broke out Tuesday and Wednesday, respectively, though on disappointing turnover. They are nevertheless discussed below for those seeking more long exposure in the current environment.
Hopefully, the above discussion provides transparency into the thought process as we navigate a bull market that is not exactly overflowing with the attractive bases and solid volume seen earlier in the year. On the bright side, our swing setups continue to perform well, with the two recent entrants, BYND and SHOP, taking 1R in profit in the first 1-2 days post-entry. These two are believed to be better utilized as swing entries for position trades, given their sterling fundamentals, and not as simply 1R trades. For purposes of calculating win rate, though, 1R is always used.
Among the names, Amazon.com (AMZN) came out of a two-month base Tuesday on +10% volume and followed through Wednesday on +23% volume. Estimates are 36%/40% for this year and next. An 85 RS stock in a 79 RS group with a B acc/dist rating.
The stock is 3% past its pivot, is within the 5% buy zone above an entrance pivot, and can be taken as long as it is below its 5% level of 2,062. Earnings expected July 25 (unconfirmed).
Dexcom (DXCM) shows hefty earnings growth estimates of 138%/58% for ‘19/’20. Revenue growth has been big, at 53% and 52% in the recent two quarters. A 93 RS stock in an 88 RS group with a B+ acc/dist rating.
Price forms a four-month cup. The key day was 6/10, when price jumped 9.9% on +257% volume to clear a bottoming formation. DXCM can be taken above the 157.50 high of June 20. Earnings expected July 31 (confirmed).
Facebook (FB) shows earnings estimates of -6%/32% for ‘19/’20. Revenue increased 30% and 26% for the recent two quarters. A 90 RS stock in a 75 RS group with an A- acc/dist rating.
The stock cleared a two-and-a-half month consolidation Wednesday, up 1.8% on +22% volume. As it is 2% above its pivot, it can be taken as long as it is below the 5% buy zone limit of 208.40. Earnings expected July 24 (confirmed).
Among open positions taken in June and July, winners include, in alphabetical order: Avalara (AVLR) +8.5%, Beyond Meat (BYND) +6.3%, Caredx (CDNA) +12.4%, Cornerstone Ondemand (CSOD) +1.7%, Coupa Software (COUP) +13.9% and +5.3%, Everbridge (EVBG) +10.8%, Goosehead Insurance (GSHD) +23.4% in MFE, currently +13.3%, Innovate Industrial Properties (IIPR) +41.9%, Kirkland Lake Gold (KL) +14.7%, Kratos Def & Security Solutions (KTOS) +4.9%, Novocure (NVCR) +15.3%, Paycom Software (PAYC) +8.9%, Q2 Holdings (QTWO) +12.6% and +5.0%, Sea Limited (SE), +14.2%, Servicenow (NOW) +6.1%, Shake Shack (SHAK) +4.4%, Shopify (SHOP) +1.6%, Smartsheet (SMAR) +7.7%, +7.7%; and Wix.com (WIX) +1.2%.
Among open positions taken in June and July, losers include Chipotle Mexican Grill (CMG) -0.8%, Clarivate Analytics (CCC) -1.0%, Zynerba Pharmaceuticals (ZYNE) -4.0%.
Among closed positions taken in June and July, winners include Axsome Therapeutics (AXSM) +1.0%, Beyond Meat (BYND) 37.8% MFE, Guardant Health (GH) +16.8% MFE, Mongodb (MDB) +24.9% MFE, and Uniqure +1.0%, MFE was 12.1%.
Among closed positions taken in June and July, 6% stopouts include Zscaler (ZS), Twilio (TWLO), Dexcom (DXCM), NeoGenomics (NEO), twice; and SSR Mining (SSRM) was a 4% stopout.
Among recent new issues (IPOs) taken in June and July using swing setups, stopouts were in Akero Therapeutics (AKRO) -5.8%, Fiverr International (FVRR) -5.5%, and Slack Technologies (WORK) -3.5%. As recently noted, recent new issues like these in most cases will not be used for future swing setups due to the increased noise and volatility from, in most cases, less-than-preferable liquidity. This type of issue will need to put in more time on their chart, then, before being considered as a viable swing setup.
(BYND is an example of how more time was given for an IPO to put its first few trading weeks behind it before considering a swing entry. It also is an exceedingly deep stock with which to trade (ADDV $1.5B).)
With that said, IPOs will always be monitored for breakout-cheater entrances.
Assumptions for the above: Upon gain of 8%, stop is moved to breakeven +1%. Upon gain of 15%, stop is moved to +5%. Upon gain of 20%+, MFE is listed since this is a level at which half or all of a position can be closed.
Many of the above long ideas were mentioned in the five-day-a-week Focus List only (for premium subscribers), as they happened to occur on days other than twice-weekly report days. In theory, it is logical to expect premium subscribers to receive roughly 150% more trade ideas than basic subscribers due to there being five updates a week vs. two for basic plan subscribers.
A more exhaustive summary including all swing setups taken in June-July will be included in the next report.
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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 positions in BYND and 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.