Stocks roared back on Monday following five days of red ink, with the Nasdaq up 2% on its widest range day in 27 sessions. While welcome, the shallowness of the pullback unfortunately kept a number of leading names from building out what had been abbreviated, one-week ledges.
The net result is a market that is still devoid of quality setups. Most of the emerging leaders that this service flagged beginning in early January and into February have already broken out. They are now extended beyond their most recent basing areas.
A number of issues moved out of one-week ledges, but this is generally not something that is preferred. The reason is because a one-week pattern is normally not enough to shake the hot money’s attention away from a stock.
There are exceptions. Tandem Diabetes Care (TNDM) was one, and it was placed on the Focus List Tuesday evening. Today it cleared its ledge, +3.2% on +125% volume. When a stock is up 25-fold in seven months as TNDM was in ’18, one treats it differently -- especially since it is +55% from our subscriber buy alert four weeks ago.
Thus, a name like this that has proven it has what it takes to be a big leader is given the benefit of the doubt.
Trust, but verify.
Arcosa (ACA) was analyzed in Sunday’s report (“Very aggressive players might consider this above the 35.15 handle high, though at least a few more days of basing is preferred prior to entry”). The comment stands. Price continues to back and fill, a positive.
Amarin (AMRN) was discussed in Sunday’s report (“The intriguing thing about AMRN is its move from 2 to 23 in six weeks’ time last autumn. The stock forms a four-month cup that is three days into a handle. An aggressive operator can take this on a break of the 23.34 pattern high”).
Speaking of strong names, this is obviously one of them. The handle is now six days in length. It can be taken above the handle high of 23.25.
Canopy Growth (CGC) was discussed in the Mar. 3 report (“The intriguing thing here is the recent double in just six weeks. This was met with selling which took the stock back nearly 20%. Price can be taken above the 51.81 cheater entrance pivot”).
Another very strong title. Volume has dried up nicely for three weeks as price moves sideways. The 51.81 cheater entrance pivot is valid.
Mirati Therapeutics (MRTX) is a higher-risk biotech issue given its status as a development-stage company. This means it has no revenue and earnings to speak of. It also means we are left to “trade off the chart,” with no guidance from fundamentals. A 98 RS stock with a B+ acc/dist rating.
(The “acc/dist rating” is an O’Neil metric that looks back 13 weeks to determine the level of accumulation (higher-volume buying) and distribution (higher-volume selling). Ratings of B+, A-, A, and A+ are preferred.)
MRTX forms a two-and-a-half week pullback that found support last week at the top of its prior base and just above its 50-day line. The stock rose 6.4% Wednesday on +84% volume. It can be taken above the 79.31 high of its pattern. Again, this is a higher-risk issue, though liquidity is good at $51MM ADDV.
Ringcentral (RNG) can be taken above the 109.84 high of its four-week shelf. Earnings are expected to be 31% higher in '20.
Roku (ROKU) was mentioned in Sunday’s report (“I would not expect it to form a five-day handle, break out, and then follow through. It will need to put in more time than that, in my opinion”). Wednesday, the stock dropped 14% on +178% volume after announcing an offering of stock.
There is nothing to do with this stock. For education purposes, it is noted because when one sees a name with a 66% deep cup rally aggressively up its right side, at best it must put in some real time basing before any breakout can be considered legitimate. In ROKU’s case, it raced up 185% in 12 weeks. It will be interesting to see if this week’s high ends up being a double top.
Stoneco (STNE) came public during the bear market of late ’18. Since bottoming Dec. 24, it was up 89% through Tuesday, qualifying it for 10th place of the 62 watch list names during this period. The Brazilian company processes credit card transactions.
Earnings are expected to jump 557%/150% in ‘18/’19, while sales ballooned by 82% and 75% in the two recent quarters. A 93 RS stock with an A- acc/dist rating.
The stock is working on a 50% deep cup-with-handle. The handle is an excessive 19% deep, though it found support at the 20-day line. Earnings are expected Mar. 18. Let’s hold off on any purchase until after the report.
Yext (YEXT) is a cloud play with no earnings, but very steady sales growth of 33%-39% in the most recent eight quarters. A 96 RS stock with an A acc/dist rating.
After announcing earnings last week, price jumped 10% on +501% volume. Since then, it forms a four-day flag pattern. It would be preferable to give this issue more time to round out the pattern, as opposed to taking it on a Thursday breakout. This will be covered in the upcoming videos.
In sum, the number of pattern setups in leading growth actors is slim. This is a reflection of the fast, 10-week move post-Dec. 24. The aggressive growth-stock player should stay disciplined to only take the names that fit his plan, and should remain patient until they do.
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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 a position in TNDM, 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.