Following the Wednesday report, stocks continued their rebound from an oversold condition, with the Nasdaq Composite registering an O'Neil follow-through day on Friday.
The cautionary red font in the Focus List was removed Thursday evening and long exposure was indicated above and beyond the "pilot buy or two" view that was in place earlier in the week. Focus List names used for fresh-money buys have performed well.
A decision was made not to chase the V-shaped pattern reversals in a few leaders such as Coupa Software (COUP). Staying disciplined is obviously an integral part of any approach to speculation.
There are a reduced number of names in this report as some are still setting up but are not yet actionable, e.g. ServiceNow (NOW), Alteryx (AYX), and Goosehead Insurance (GSHD).
Among the names, Avalara (AVLR) worked out well for us after being issued May 7 as a buy idea at about 54.00 and moving up 39% to 74.90 in eight weeks. Earnings-per-share estimates are -0.68/-0.18E/0.04E for ‘18/’19/’20. Sales have grown at 33% and 38% in the two recent quarters. A 99 RS stock in a 94 RS group with an A- acc/dist rating.
Price forms a four-and-a-half week shelf with 14.8% depth. The pattern is somewhat wide and loose and could stand some further seasoning, however the depth is not excessive for this length pattern. It can be taken above 74.90. Earnings expected Aug. 6 (unconfirmed).
Innovative Industrial Properties (IIPR) was discussed in Wednesday’s report (“It can be taken above the 93.24 high of its eight-week base”). Thursday, the stock broke out of its base on +101% volume, but closed below the lip (pivot). Friday, we saw a volatility contraction day which left price 2% above its pivot.
The stock can be taken above Friday’s high of 96.75. Earnings expected Aug. 7 (unconfirmed).
NeoGenomics (NEO) moved up as much as 25% after clearing our suggested entry pivot on Feb. 22, though there were a few pullbacks in between, including a 5% retreat beginning five days after entry. Earnings estimates are for 63%/35% in ‘19/’20 and sales rose 25% and 51% in the recent two quarters. A 98 RS stock in an 81 RS group.
Price forms a five-week base with a 13.4% depth. It can be taken above the 23.85 pattern high. Earnings expected July 30 (unconfirmed).
Novocure (NVCR) was noted in Wednesday’s report (“It can be taken above the 56.67 pattern high. Earnings expected Aug. 1 (unconfirmed)”). The comment stands.
Tandem Diabetes Care (TNDM) was mentioned in the June 2 report (“The stock can be taken above the 72.19 cheater entrance pivot. Alternatively, the 74.81 pattern high can be used for a pivot. Earnings expected July 30 (unconfirmed)”). The comment stands.
Veracyte (VCYT) shows losses expected this year and next. Sales increased 31% and 47% in the two recent quarters. A 99 RS stock in a 68 RS group with a B acc/dist rating.
The stock forms a nine-week base with a shakeout/spring in the middle of the pattern. It can be taken above the 26.80 high of this formation. Earnings expected July 30 (unconfirmed).
In sum, subscribers should have expanded long exposure Friday and should be looking to increase it if this follow-through continues. Let's continue to play things one day at a time and realize the market is entitled to a breather after four-straight up days.
Q: Are you familiar with the u-turn ipo base? It seems like I heard that term from Gil Morales but I'm not sure. What has been your experience, if any, with that type of base? Is CCC constructing a u-turn ipo base? Thanks.
A: Yes, we always look for the first base to form in a recent new issue (IPO). This is one of the setups we would use to get into a recent new issue that is believed to possess above-average return potential. The first base for CCC was cleared in mid-January. Up until then, it was forming its first base. O'Neil makes an exception with these types of bases in that they do not have to be 5-8 or more weeks long as with all other bases. I hope this helps.
Q: I had a quick question. I have been watching TREE and the fundamentals are pretty good with a lot of RS as well. It definitely is one that can move as well. I had noticed that this didn't appear on your watchlist. I was intrigued, is there something that you don't like in this name in particular?
A: Good catch. TREE has all the things we look for: estimates (including sales growth), relative strength line slope, and technical chart pattern. The reason it was not included on the Focus List was the group, which is not known to produce many big-winning stocks. I particularly like Friday's volatility contraction. It goes on this evening's Focus List. Thanks for pointing this out.
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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.