Stocks continue to discount a looming round of Federal Reserve interest-rate cuts. This occurs amid favorable sector rotation out of defensive sectors such as utilities, consumer staples, and real estate, which have lagged since the June 3 intermediate-term correction low.
Despite the upbeat appearance at the surface, there are very few pattern setups available to the momentum player. While the goal is to cover 10-12 names in these reports, there recently have been less than 10, such as this report's four.
Fortunately, we have been able to take advantage of the swing/pullback setups, the majority of which have appeared in the Focus List available to premium subscribers. There were three recent stop outs of swing setups for recent IPOs. Accordingly, an adjustment will be made: Names that are this young in age will no longer be considered for such setups, as their volatility taints the edge normally inherent in these patterns.
Outside of this, since June 1, the swing setups have exceeded expectations in terms of win rate.
Among the names, 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 92 RS stock in a 90 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).
Guardant Health (GH) should log losses this year and next. Sales have ballooned by 90%, 95%, 64%, and 120% in the four most recent quarters. A 99 RS stock in an 86 RS group with a B+ acc/dist rating.
GH has been the biggest winner for the service thus far, up 71% in two weeks and as much as 145% in four weeks during Q1. Since then, there have been three Focus List buys for the stock, one stop out and two winners, one of which was a swing setup.
Price forms a two-week handle and sits about 8% from its handle high. It may be taken above the 94.44 handle high as a cheater entrance. Earnings expected Aug. 8 (unconfirmed).
Luckin Coffee (LK) is a recent new issue that vaulted as much as 53% in its opening day six weeks ago. (Recent IPOs that rise as much as 50% or more during the first two months of trading are favored for subsequent setups. They tend to become market leaders.) Most analysts expect losses for ‘19/’20. Sales growth is not applicable since there was next to none in the year-ago quarters.
Price has been basing since the stock went public. It can be taken above the 6/18 high of 21.80 as a cheater entrance. This is a higher-risk name due to it being Chinese and a recently-issued stock. Expected earnings date unavailable.
Zynerba Pharmaceuticals (ZYNE) produces synthetic cannabis treatments for epilepsy and neuropsychiatric disorders. Losses are expected for this year and next. This is a development-stage company, as it has no revenue. Despite this, ZYNE is a 99 RS stock in an 84 RS group with an A+ acc/dist rating.
Price forms a mini cup-with-handle over the last six weeks. Volume dried up handily during the formation of the handle’s lows, found support at its 50-day line, then vaulted 6.6% Friday on +93% volume. It can be taken above the 14.90 handle high. This is a higher-risk stock given its teen price of about 15 and its development-stage status.
Despite its small market cap of $311MM, it has ample liquidity based on its $35MM ADDV. Earnings expected Aug. 7 (unconfirmed).
In sum, the climate appears ripe for further upward revaluation. At the moment, there are scant pattern setups for either breakout or pullback players. We will continue to be patient and, as is our wont, will not force the issue.
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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 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.