March 17, 2019

These reports target 10-12 issues in a normal market, with up to 16 or even more in the early stages of what appears to be an intermediate-term advance. Reports such as this one, with fewer than 10 issues, are a reflection of a paucity of pattern setups.

In this case, the market is a victim of its own success, having risen well enough to exhaust its supply of growth-stock glamours on which we focus our attention. At some point, either the averages will correct more than just trivially, or the original batch of leaders will be in need of rest on their own. Either way, more setups should appear that are expected to provide us with more opportunities than we have seen in the past several reports.

The Nasdaq and S&P both act well, with little desire on the part of institutions to pull back from the feeding trough. Friday's technical action might be easily ignored, given it being a quarterly options and future expiration. This distorts volume, as shown below.

Coupa Software (COUP) released earnings last week and, following the reaction to the report, put in two positive sessions on Thursday and Friday. While earnings growth is expected to drop from 18 cents a share in the January ’19 fiscal year to 7 cents a share in the January ’20 fiscal year, the Street still expects an increase to 32 cents in the January ’21 fiscal year.

Thus, it is still viewed as a bona fide growth stock with sizable potential. This is also evidenced by the revenue growth of 43% and 39% in the recent two quarters.

The recent high of 99.64 of Mar. 4 can be used as an entrance pivot. An alternative pivot would be above Friday’s high of 97.00.

Etsy (ETSY) shows earnings growth estimates of 8%/56% for ‘19/’20. Sales have increased 41% and 47% in the two recent quarters. A 98 RS stock with a B acc/dist rating.

The stock can be taken above the 73.34 high of its two-week consolidation pattern.

Freshpet (FRPT) shows a ’19 earnings estimate of 13 cents a share, up from the -15 cents of ’18, while the ’20 estimate is for a 354% jump to 59 cents. The last two quarters have seen sales go up 27% and 30%.

Friday, the stock undercut the lows of the prior five days before reversing and closing near the day’s high, up 2.5% on +16% volume. FRPT can be taken above the Friday high of 42.02.

Innovative Industrial Properties (IIPR) is a real estate investment trust (REIT) that invests in real estate used for cannabis growing. Earnings growth is estimated to be 102%/34% for ‘19/’20. Revenue growth is triple-digit in recent quarters. A 99 RS stock with a B+ acc/dist rating.

That this is a v-shaped, two-week consolidation is a risk. On the plus side, the weekly chart shows two major accumulation weeks in the last four, with no distribution weeks during this stretch. Price can be taken above the Friday high of 80.50. This is considered an aggressive entry. Earnings expected June 12.

Mirati Therapeutics (MRTX) was discussed in Wednesday’s report (“It can be taken above the 79.31 high of its pattern. Again, this is a higher-risk issue”).

There were two major accumulation days, one on Wednesday and one of Friday. Each day, the gain and volume % increase were of consequence. The comment of Wednesday stands: The stock can be taken above the 79.31 high of its three-week pattern.

RingCentral (RNG) is an enterprise software company with negative earnings growth forecast for ’19 and 31% growth for ’20. Sales are rock-solid, with the last four quarters being 34%, 34%, 33%, and 34%. A 95 RS stock in a 99 RS group with an A- acc/dist rating.

RNG can be taken above the four-and-a-half week base high of 109.84.

Yext (YEXT) is a software company with losses expected this year and next. In Wednesday’s report, it was noted that “It would be preferable to give this issue more time to round out the pattern.” Revenue has expanded 33% in each of the last two quarters. A 96 RS stock with an A- acc/dist rating.

The stock is coiling as it forms a six-day textbook pennant with higher lows in each of the last three days. YEXT was up as much as 32% in eight sessions, and it is possible it needs more time to digest this run-up. A very aggressive player can consider taking this above the pattern high of 23.28.

In sum, conditions for profitable speculation remain intact, albeit with few pattern setups from which to choose. This will change, as the market is never about the status quo, but about changing expectations.

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 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.