Stocks have handled themselves well in recent sessions, with Friday showing a gap-down opening that reversed to close well. Any hesitation in here would not be a surprise given that the Nasdaq Composite is testing its prior record high of April.
A number of Focus List stocks have begun to move out since entry, including ZS, COUP, PAYC, SHAK, NOW, SE, KTOS, AVLR, NVCR, CCC, PODD, VEEV, SMAR, and AXSM. Stop outs have been few.
Meanwhile, pattern setups remain on the scarce side. Our Focus List contains six names, all of which are discussed below.
Among the names, Beyond Meat (BYND) shows per-share estimates of -0.27/0.05 for ‘19/’20. Sales growth has exploded, up 175% and 215% in the recent two quarters. A 99 RS stock in a 99 RS group, though the group strength is largely due to BYND. The acc/dist rating is A+ per O’Neil.
The stock sets up as an aggressive pullback entry above Friday’s high of 153.79 with a suggested stop pivot of Friday’s low of 148.06. This equates to risk of 3.8%. The past three days have seen volatility shrink appreciably along with volume. Earnings expected Sept. 5 (unconfirmed).
Chipotle Mexican Grill (CMG) shows earnings growth of 47%/28% for ‘19/’20, per most Wall Street analysts who follow the stock. Sales have increased 10% and 14% in the recent two quarters. A 96 RS stock in a 72 RS group with a B acc/dist rating.
Price forms a three-week, flat shelf with a tight 4.3% depth. It can be taken above the 749.25 pattern high. Earnings expected July 23 (confirmed).
(A shelf is a three- or four-week consolidation. A ledge is a one- or two-week consolidation. A base should be five weeks minimum for a flat base, six weeks minimum for a cup, and seven weeks minimum for a cup-with-handle or double bottom base.)
Cornerstone Ondemand (CSOD) is predicted by Wall Street to record earnings growth of 41%/39% this year and next. The software developer has posted weak sales growth of 5% in each of the past two quarters. An 86 RS stock in an 87 RS group with an A- acc/dist rating from O’Neil.
The stock forms a five-month cup with a 17% depth. A plus is the reduced time spent on the right side of the base, five weeks, vs. the left side, 16 weeks. As well, this pattern is actually a subset of a much larger, five-year base, another positive. Negatives are the light recent revenue growth and the less-than-preferred 86 RS rank. The stock has outperformed the Nasdaq Composite by 19% to 11% since the June 3 intermediate-term correction low.
CSOD can be taken above the pattern high of 60.19. The five-year pattern high is 61.85. Earnings expected Aug. 5 (confirmed).
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 94 RS stock in an 89 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, 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 seven 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 often 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.
Zendesk (ZEN) and Atlassian (TEAM) have good price/volume correlation in their four-week shelves. I would prefer to let them break out and establish a trend and then wait for a pullback before considering entry.
In sum, patience is the order of the day. Many stocks are beyond entrance points. Let's let the market come to us in the meantime.
Q: In today's video (07/02) there was mention about a 1R pullback strategy. Is there a link that explains this?
Q: Would like to better understand how you pick your stops & buy points in your methodology. Thanks again for the great education!
A: For over 25 yrs, I have freely shared in my reports and speaking appearances every microscopic speck of info that I have learned about position trading in the breakout style popularized by O'Neil.
Beginning in 2009, I began researching, developing, acquiring, backtesting, forward testing, demo trading, and/or live trading more than 100 strategies/systems related to short-term trading (intraday and swing, both pullbacks and reversals), not position trading breakouts a la O'Neil.
This took more than 5,000 hours of time, not to mention cost. At the conclusion of this project, I had developed a body of proprietary IP. I chose to keep this IP to myself for use in my own trading as I was not terribly interested in sharing with the world info which took such effort.
As I explained on the About page of the site and also the June 17 video, the swing trader setups are considered proprietary and confidential. After seeing enough of these in reports and videos, anyone can see what it is that I am trying to accomplish: staying in synch with the trend while entering on weakness.
My thanks for understanding.
On a swing setup, the entry will almost always be above yesterday’s bar, i.e. the signal bar. The stop loss will usually be below the low of the signal bar. These are one-day setups: If they do not trigger that day, the setup is negated. Sometimes they will reset for the next day.
Hi Kevin! Your service is awesome, I like that you have expanded your offerings to swings and to your personal thought process. Trade services just don't give that personal touch. Great job. I know the IPOs can be volatile, but they are such an important part of finding the treasure…your strategy for entry is different than IBD and I found it to be refreshing that you bring your way to the subscribers. So I know that there were some IPO swings that stopped out, but your entry to these fast movers and potential big winners is rare and good to see. Is there a way that you could include them in perhaps your video but not include them in focus list..learning experience only?! Thanks.
Thank you for the nice note. It is appreciated. I think either something fits a model or it doesn't, and if it doesn't, I would not want to use it as an educational example. Not to worry, though. There should be plenty of recent new issue setups in the future, just with a little more definition, less volatility, and higher probability, hopefully. Let's keep an open mind!
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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.