June 5, 2019

Stocks are in a two-day rally off of an oversold condition. The trend remains down which means, at most, we should be considering a pilot buy or two. At most.

What makes this situation somewhat unique is that the growth sector has held up well during this month-plus, 10.8% correction in the Nasdaq Composite. If not for that, it would be premature to entertain the idea of a pilot buy or two after just two days up following a 10.8% drop.

How much exposure you want to have, if any, is predicated on your unique makeup related to risk tolerance, temperament, experience, etc. The names discussed below as well as those on the Focus List are there for you to use either presently or when the averages show confirmation that an intermediate-term advance may have begun.

Clarivate Analytics (CCC) is expected to post earnings growth of 800%/78% in ‘19/’20. This is a development-stage company with no revenue. A 97 RS stock in a 95 RS group with an A acc/dist rating. Of bullish note is the RS line which hit new-high ground Wednesday ahead of price. CCC has outperformed the S&P in six of the last seven outings.

This is a higher-risk issue given the teen-price and ADDV of $10.9MM. Price is four weeks into the formation of a cup. This is not actionable presently, but can be monitored for a possible entrance as it gets nearer to its pattern completion.

Caredx (CDNA) shows predicted earnings-per-share figures of -0.15/0.08E/0.59E for ‘19/’20. Revenue grew at a hefty 88% and 85% in the two recent quarters. A 96 RS stock in a 72 RS group with a B- acc/dist rating.

Price forms a cup-with-low-handle and can be taken above the 35.17 handle high. Earnings expected Aug. 7 (unconfirmed).

Fluidigm (FLDM) is expected to show losses for this year and next. Revenue has been 17% and 19% in the two recent quarters. A 99 RS stock in an 82 RS group with a B+ acc/dist rating.

Given the lack of impressive fundamentals, we are left to “trade off the chart” alone. Price forms a 10-week consolidation with a 25% depth. For a name that had moved up 83% in just five weeks, the depth is reasonable. In light of the uni-directional move up the right side of its base, FLDM can be monitored for a pullback prior to it reaching the 14.90 pattern high.

This is higher risk given the teen-price and the $9.3MM ADDV. (ADDV of at least $25MM-$30MM is preferred.) Earnings expected Aug. 2 (unconfirmed).

Industrial Innovative Properties (IIPR) was discussed in Sunday’s report. Wednesday it rose 8.6% on +46% volume. It can be taken above the 93.24 high of its 11-week base. Earnings expected Aug. 7 (unconfirmed).

Mongodb (MDB) was noted in Sunday’s report (“A cheater entrance can be taken above the 148.00 high of 5/17. Alternatively, the 154.80 pattern high can be used. Earnings expected June 5 (confirmed)”). Wednesday, the stock jumped 7.7% on +126% volume to take out the cheater pivot of 148.00. After the close, the company released earnings which saw price last dip to 140.91 in the after-hours.

The cheater entrance for this 99 RS stock is moved to Wednesday’s high of 148.87 along with the traditional pattern high pivot of 154.80.

Novocure (NVCR) was mentioned in Sunday’s report (“It would be preferable to see this title form a handle to go with its cup. Regardless, it can be taken above the 56.67 pattern high. Earnings expected Aug. 1 (unconfirmed)”).

NVCR forms a five-day handle to go with its cup. Wednesday, price barely cleared the handle high before settling back below the lip. Volume was -27% on the day. Given this slack level of activity, as well as Tuesday’s volume only equaling the 50-day average, it would be preferable to wait until price clears the 56.67 pattern high before considering entrance.

Q2 Holdings (QTWO) shows expected earnings growth of -50%/246% for ‘19/’20. Sales have increased 30% in each of the two recent quarters. A 90 RS stock in a 94 RS group.

The stock forms a five-week flat base with an 11% depth. The announcement of a proposed secondary offering helped push price down 5.8% on Monday. However, on Wednesday, price staged an undercut-and-reverse move on +225% volume. The “undercut” was the takeout of the 68.04 swing low of early May. Followers of Richard Wyckoff will recognize this as a spring pattern, or reversal.

QTWO can be taken above Wednesday’s high of 70.94, with Wednesday’s low of 67.60 being a suggested stop-loss pivot. This equates to under 5% risk. Earnings expected Aug. 6 (unconfirmed).

Wix.com (WIX) forms a three-and-a-half week flat base with an 8.7% depth. The 97 RS stock can be taken above the 143.82 high of this pattern. Earnings expected Aug. 15 (unconfirmed).

In sum, cash remains king. Given the upright posture shown by numerous growth titles, a pilot buy or two using measured position sizing can be considered by aggressive players despite the lack of confirmation in the averages.

Q&A

Q: Hi Kevin, Continue to love the service. Just renewed my quarterly premium subscription. I took a small pilot position on GH Tuesday as it broke out. Considering current market conditions, would you handle add-on buys any differently, i.e. more conservatively? There is a lot of room between the BO and the recent ATH. Thanks.

A: Thank you for your comment and question. A pilot position should be allowed to show some profit over more time than just the entry day before considering an add-on buy. GH, a 99 RS stock, is likely to provide an add-on pivot as it makes its way up the right side of its cup.

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.