June 21, 2020

The Nasdaq plodded along late last week as it stayed within a seven-day trading range amid Friday's quarterly expiration of options and futures contracts on stocks and indices. It is a mild plus that the growth index spent Wednesday and Thursday digesting the 3.2% gain of Monday and Tuesday amid two of the narrowest-range days of the bull market.

The unprecedented degree of money creation by the Fed is the main means of support for share prices. Institutions know the Fed has the market's back. This should be the case no matter who is in the White House next year. Risks include a pick-up in the coronavirus infection rate and a deteriorating U.S.-China trade relationship.

Otherwise, leadership is solidly growth-oriented. A full 14 industry groups in the O'Neil rankings are in the Top 20 of 197 groups when ranked by relative strength. These are yellow highlighted in the below table. Note that nine of the 14 are software-related, a plus as these are the areas of the economy racking up the biggest sales growth.

Since the bull market began Mar. 23, the top three Focus List buy ideas on an MFE basis have been Sea Limited (SE), +109% in nine weeks; Pinduoduo (PDD), +97.2% in nine weeks; and Shopify (SHOP), +74% in nine weeks. To download an updated Trade Review covering Mar. 23-June 19, please click here.

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ACM Research (ACMR)

Advanced  Micro Devices (AMD)

Dexcom (DXCM)

Horizon Therapeutics Public (HZNP)

Moderna (MRNA)

Papa Johns International (PZZA)

RingCentral (RNG)

Zillow Group (Z)

In sum, the price/volume behavior of the major averages and the action of the leading stocks are the only two primary general market indicators that have been used here for 30 years. Both are in superb shape. Subscribers should continue to buy the growth-stock leadership while maintaining an open mind as to what could happen amid a unidirectional 13-week bull market.

Q&A

Q: It would be really great if you could possibly touch on how you handle cutting losses on 2nd and 3rd buys based on pyramiding. Main reason for the question is if the 2nd or 3rd buys start working against you, do you still utilize a 3-6% stop loss for these respective buy or maybe keep a tighter leash on the 2nd and 3rd buys. I am sure this varies case by case, but just getting your perspective would be great. 

A: I believe I discussed this in a prior Q&A section within a report. One can either use individual stops for each tranche or use the weighted average cost and begin to trim the total position as price moves back toward the average cost area. I have used both. To answer your question, I tend to keep the second and third tranches on a tighter leash. While the first technique of using stops for each of the three tranches is more precise, when holding multiple positions having three tranches each, it can be cumbersome to keep track of multiple tranches.

For example, for five positions, one could be keeping track of 15 different stop levels. Therefore, for ease of use and the sake of practicality, the average cost technique is probably best for most people.

Kevin Marder

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All stock charts created using MarketSmith unless otherwise noted. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. 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 a position in SHOP, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.