June 16, 2019

The market has acted well since the low printed in the averages nine days ago. Subsequent to the O'Neil follow-through day, the Nasdaq rose one day before some light profit-taking took hold. The last three sessions have seen volume and volatility both dry up. This is exactly what we like to see, as it suggests profit-taking is not worrisome following the swift move up off the low.

The action of the leading growth-stock glamours has been commendable. Some are selling off as a weeding-out process takes place. Unfortunately, the Focus List of actionable names is slim, contributing to the brief nature of this report.

Subscribers should have some long exposure to this market. A pullback in the averages would be understandable given the swift move up off the low. The Fed meets this Wednesday, and it would not be a surprise to see stocks tread water until then.

Caredx (CDNA) recorded a loss of 15 cents a share in ’18 and is expected to notch earnings per share of 8 cents and 59 cents in ‘19/’20. Sales growth is consistent and strong, at 88% and 85% in the two recent quarters. A 97 RS stock in a 72 RS group with a B acc/dist rating.

Price forms a three-month cup-with-low-handle. A plus is the 7.0% gain on +54% volume as price emerged from the handle on June 6. This was the last entry point for CDNA and its MFE since that entry was 10.6%. Given that this exceeds our 8% rule for moving a stop up, the s/l should have been moved to breakeven or breakeven + 1%. The stock is buyable on a takeout of the 39.38 pattern high. Earnings expected Aug. 7 (unconfirmed).

Etsy (ETSY) shows earnings estimates of 23%/44% for ‘19/’20. Revenue growth has been in the 40% range for the three recent quarters. A 92 RS stock in a 78 RS group with a B acc/dist rating.

ETSY forms a three-and-a-half month consolidation with a 22% depth. We will be keeping an eye on a possible cheater entrance that could form above the Thursday pivot high. In the meantime, however, the pattern high of 73.34 is our entrance pivot. Earnings expected Aug. 7 (unconfirmed).

Goosehead Insurance (GSHD) shows earnings-per-share data of -0.21/0.43E/0.69E for ‘18/’19/’20. (The “E” refers to “estimated.”) Sales increased 32% and 59% in the two recent quarters. A 97 RS stock in a 67 RS group with a B- acc/dist rating.

Price forms a three-and-a-half week mini-cup with a 19.8% depth. GSHD can be taken above the 41.72 pattern high. Earnings expected Aug. 1 (unconfirmed).

Planet Fitness (PLNT) is forecast by Wall Street to grow net by 26%/23% in ‘19/’20. Revenue has risen 30% and 23% in the two recent quarters. A 97 RS stock in a 58 RS group with a C- acc/dist rating.

PLNT builds a four-week flat base with a 9.8% depth. It can be taken above the pattern high of 81.76. Earnings expected Aug. 1 (unconfirmed).

Zscaler (ZS) is predicted by most Street analysts to show earnings per share data of -0.20/0.18E/0.19E for the July fiscal years ending in ‘18/’19/’20. Despite the trivial expected increase for the July ’20 fiscal year, sales have grown potently at rates of 54%, 59%, 65%, and 61% for the last four quarters. A 98 RS stock in a 93 RS group with a B acc/dist rating.

Despite the slight earnings growth forecast for the July ’20 fiscal year, the 98 RS rank, the powerful sales growth over the past year, and the fivefold move since going public 15 months ago suggest post-’20 growth in net will pick up.

The stock forms a four-week shelf and can be taken above the 80.38 pattern high. Thursday’s 3.3% move out of a two-bar pullback on +73% volume plus Friday’s quieter trade are encouraging.

In sum, there is a slim menu of pattern setups from which to choose in the growth sector. Let's respect the message this is sending and continue to take things one day at a time.

Kevin Marder

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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.