November 24, 2019: Part I of II

Stocks tread water over the past three days, which is viewed as healthy and a positive.

The Fed has said it will add $60B per month in reserves to the financial system from now until spring. Sophisticated players, institutions, have seized this as an opportunity to buy the market, which may explain why the risk-on trade has returned to the growth sector. This occurs as more growth stocks complete bottoming formations in order to focus on moving up the right side of their bases.

It is important to understand that big-winning stocks often do not have pretty chart patterns that look as though they belong in a technical analysis textbook. The now-famous chart of Cisco System (CSCO) from '90, which is discussed in the public blog, is a good example of this.

Rather than how pretty a pattern looks, of import is the accumulation shown along the right side of their bases.

Among other names previously purchased, I hold CRSP, DDOG, and STNE, and will look to add to these if the opportunity presents itself. CRSP, in particular, has the potential as a disruptor to turn into something special. Time will tell.

Allakos (ALLK) is a development-stage biotech concern. As such, it has no earnings or revenue. A 98 RS stock in an 85 RS group with a B+ acc/dis rating.

In a single day in August, it soared 111% on gigantic volume of +1,528%. It then added 22% on +559% volume the next day. Over a three-day period, it nearly tripled. Since early August, it has been consolidating these tremendous gains. Over the Mon-Tues-Wed period last week, it is +21.8%, with Tuesday and Wednesday occurring on +90% and +81% volume.

The stock sets up as a buyable pullback in an uptrend. Very aggressive players can take ALLK above Friday’s high of 87.31. Aggressive traders can look at the pattern high of 92.84 as an alternative entry pivot.

Coupa Software (COUP) has generated a buy idea more often than any other name since the service’s inception over a year ago – a total of eight times.

The Street looks for this enterprise software issue to show an earnings decline of 11% in the January ’20 fiscal year, followed by an estimated 138% growth rate in the January ’21 year. Sales have expanded 44% and 54% in the last two quarters. A 97 RS stock in a 56 RS group with a D- acc/dis rating.

The stock is not actionable at present since its earnings report is expected Dec. 2 (confirmed), but will be monitored for its post-report reaction. It is hoped things may tighten up prior to the report.

Crispr Therapeutics (CRSP) was on the Focus List Nov. 11 as a cheater entrance at 52.28. It became a triggered trade the following day and over six sessions took an MFE of 41.5%. Over the past three days, it has pulled back 16%.

The stock sets up again as a buyable pullback in an uptrend. This is more aggressive than other bread-and-butter trades we have seen due to the higher volatility of the past four sessions. For example the suggested stop pivot is 58.36, a full 8.1% below the entry pivot of Friday’s high of 63.48.  This is substantially more than the 2%-4% trade risk normally seen with this setup type.

However, proper position sizing can still use one’s normal account risk despite the higher trade risk. For aggressive and very aggressive players. Earnings expected Jan. 27 (unconfirmed).

Novocure (NVCR) was a significant winner for us, up as much as 74% in just over two months after it was put on the Focus List June 12. Earnings per share is expected to move from a 12-cent loss this year to a 38-cent profit next year. Sales have grown steadily at 41% and 42% in the last two quarters. A 99 RS stock with a B+ acc/dis rating.

NVCR is forming a beautiful three-month cup with avid institutional buying on the right side of the pattern (three major accumulation days in the last five sessions). A preliminary entrance pivot of 98.70 (the pattern high) can be used, however this pattern is likely to result in some form of handle forming. Price is 5% from the pattern high.

Roku (ROKU) shows losses for ’19/’20, though revenue has swelled 59% and 50% in the last two quarters. A 99 RS stock with a B+ acc/dis rating.

Price forms an 11-week consolidation with 44% depth. A very aggressive player will use the four-day handle high of 165.10 as a cheater entrance pivot. An aggressive or less-aggressive operator will wait for the consolidation pattern to be completed or for the stock to form an alternative entry prior to reaching the pattern high, 10% from Friday’s close.

In sum, there are two auspicious times per year on average to buy stock. The current period is considered such an opportunity. Let's continue to be patient, pick our spots, and maintain an open mind as to anything and everything.

Kevin Marder

For intraday ideas and analysis:

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 CRSP, 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.