November 26, 2019

Given the shortened holiday week, this report takes the place of the regular Wednesday report.

Stocks continue to show good tone, with volume coming in above expectation this month and distribution seemingly nonexistent.

Beneath the surface of the averages, both biotech and software segments remain under accumulation. The accent on growth has stolen a bit of value stocks' thunder, but there are still numerous value issues that react well to earnings reports with gap-ups of their own.

Certain growth-stock breakouts have occurred without a pause to form a handle. In other cycles, this might be met with selling just north of the pattern highs. Currently, this is not happening as much, and speaks to the power behind some of the moves.

Crispr Therapeutics (CRSP) is one name with the potential to be special during this cycle. It is hoped that subscribers have capitalized on the two entry points that have materialized in this title. If not, we suspect there will be another opportunity if this actor continues to behave as contemplated.

System R, a favored swing/pullback setup, has generated 9 trades in the five weeks since it was introduced, with 7 wins and 2 losses for a 78% win rate if targeting 1R. This exceeds the goal of 67% and it is to be expected that the win rate may ease somewhat in the future.

Among the names, Allakos (ALLK) is a development-stage biotech concern. As such, it has no earnings or revenue. A 98 RS stock with an A- 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 was +21.8%, with Tuesday and Wednesday occurring on +90% and +81% volume.

Sunday’s report noted: “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.”

Monday, price cleared the pullback entry of 87.31 and Tuesday saw the 92.84 entry also taken out. Tuesday’s high of 93.92 can be used as a pivot for entry. This is 1.2% past the pattern high, and is thus not extended by the 5% level usually used to determine if a stock is extended from its 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 with a D- acc/dis rating.

The stock is not actionable at present since its earnings report is expected Monday, Dec. 2 (confirmed), but will be monitored for its post-report reaction.

Franco Nevada (FNV) is a gold-oriented company centered on royalty streams. An 87 RS stock with a B acc/dis rating.

FNV forms a 12-week cup-with-handle with a 12% depth and a tight 4% handle depth. The handle high of 100.70 offers a suitable entry pivot, especially with earnings out of the way. Earnings expected Feb. 10 (unconfirmed).

Inspire Medical Systems (INSP) produces treatments for patients with sleep apnea. Losses are forecast for this year and next, though sales jumped 65% and 60% in the last two quarters. A 91 RS stock with a B+ acc/dis rating.

The stock came close to breaking out of a 12-week base today, +3.6% on +55% volume. It stands 1.4% from its pattern high of 71.71, which makes for a suitable entrance pivot. Earnings expected Feb. 4 (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 are 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 98 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 last week). An entrance pivot of 98.70 (the pattern high) can be used, however this pattern may result in some form of handle forming, which may provide a more advantageous cheater entrance. Price is 7% from the pattern high. Earnings expected Jan. 30 (unconfirmed).

Okta (OKTA) shows losses for the January ‘20/’21 fiscal years. Sales have grown 50% and 49% in the last two quarters. A 96 RS stock with a B+ acc/dis rating.

The stock forms a four-month, double-bottom base and can be taken above the 141.85 pattern high. We will be watching for a cheater entrance pivot to form prior to price reaching the pattern high. Please note that earnings are expected Dec. 5 (confirmed).

RingCentral (RNG) is forecast by Wall Street to book profit growth of 5%/15% for ‘19/’20. Sales grew 34% in each of the last four quarters. A 97 RS stock with a B- acc/dis rating.

The stock forms a seven-week consolidation with 17% depth. It is 3% from its pattern high, which can be used as an entrance pivot. Earnings expected Feb. 3 (unconfirmed).

RNG is not a favored name due to its less-than-desirable earnings growth estimates and its v-shaped pattern. However, revenue growth has been solid and steady + its powerful Oct. 4 gap-up gain of 28% on +839% volume overrides the muted estimates and chart pattern.

Roku (ROKU) is predicted by Wall Street as recording losses for this year and next. Sales rose 59% and 50% in the last two quarters. A 99 RS stock with B+ acc/dis rating.

An aggressive player will use the four-day handle high of 165.10 as a cheater entrance pivot. A less-aggressive operator will wait for the consolidation pattern to be completed. ROKU has a history of semi-wild moves. Earnings expected Feb. 5 (unconfirmed).

Servicenow (NOW) is a large, institutional quality stock with 30% earnings estimates for ‘19/’20. Revenue has risen 32% in each of the last two quarters. An 86 RS stock with a B acc/dis rating.

Price forms a four-month consolidation. A four-day handle with a high of 284.30 can be used as a cheater entrance pivot. Earnings expected Jan. 22 (unconfirmed).

Stoneco (STNE) is a Brazilian payments processor with earnings expected to grow by 90%/42% in ‘19/’20. Sales have vaulted 69% and 55% in the last two quarters. A 96 RS stock with a C- acc/dis rating.

Last Friday, price broke out of a nine-week staging area that is part of an eight-month consolidation, +20% on +489% volume. The stock was noted on the Focus List as buyable above 38.37 which it surpassed on the breakout day. It is now easing back into the base and is 10 cents below the lip. The 41.88 high of Monday can be used as an entry pivot. Earnings expected Feb. 20 (unconfirmed).

Tandem Diabetes Care (TNDM) was a burner in ’18, moving from 2 to 52 in about seven months. In Q1 of this year, we were able to take it for a profit as much as 63% in about five weeks.

The company makes medical devices for diabetics who are insulin dependent. Estimates go from a 52-cent-a-share loss this year to a 3-cent profit in ’20. Sales leaped 173% and 105% in the last two quarters. A 93 RS stock with a B- acc/dis rating.

The stock has formed an eight-month consolidation. It can be taken above the pattern high of 74.81.

Yandex (YNDX) is a provider of Internet search/content services to Russia and a few other countries. Most on Wall Street look for 24%/44% earnings growth for the ‘19/’20 period. Revenue grew 39% and 40% in the last two quarters. An 87 RS stock with a B acc/dis rating.

Price forms a four-month consolidation and can be taken above the 42.37 pattern high. While the pattern appears unorthodox, note the gap-up 12% gain on +338% volume on Monday of last week. Also note the tightness of price since then, suggesting an absence of worrisome profit-taking. Earnings expected Jan. 24 (unconfirmed).

In sum, the coast is clear for additional buying of Focus List names, discussed above. This Thanksgiving week has traditionally been a good one for the market. At some point, it is prudent to expect a pullback in the averages to occur. This would be normal and should not be viewed negatively, as it may sharpen our visibility into the identity of the true leaders.

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 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.