November 3, 2019

The speculative sentiment is building.

In the last report on Wednesday, it was noted that “For now, the growth sector still leaves much to be desired. However, there is a sense of faint improvement in some individual issues.”

Since then, the Nasdaq Composite turned in good performances both Thursday and Friday. While Thursday was a down day, price closed in the 60th percentile of the day’s high-low range, and on +16% volume. This indicates “volume support” and is a positive.

Then on Friday, the index formally broke out of a three-month staging area to close up 1.13% on the session.

As well, in Wednesday’s report it was discussed that “It will be important to use any additions, software and otherwise, to the Watch List as well as any breakouts of these Watch List names to gauge whether the speculative sentiment has truly turned.”

Along these lines, the Watch List went from 31 names on Thursday evening to 41 stocks on Friday evening. Most of these are not actionable, yet an expanding Watch List is a sign of an improving subsurface. Seven stocks are actionable and are discussed below.

Also from Wednesday: “[Market tone is] enough for aggressive and very aggressive operators to stick a toe back into the water via one or more pilot buys, especially in light of the stout averages. These test buys should use measured risk.

Among the names, 10x Genomics (TXG) is a medical products maker that came public seven weeks ago. Losses are predicted by Wall Street for ‘19/’20. Revenue has swelled 95% and 76% in the two recent quarters. An 86 RS stock in a 59 RS group.

The stock forms a six-week cup-with-handle with 29% depth and 13% handle depth. It can be taken above the handle high of 59.10. A very aggressive actor. Earnings expected Nov. 7 (confirmed).

Acadia Pharmaceuticals (ACAD) is a biotech which has lost money in recent years and is expected to do so this year and next. Sales have increased 46% and 62% in the two recent quarters. A 98 RS stock in an 80 RS group with a B+ acc/dis rating from MarketSmith.

Seven weeks ago, the stock soared 63% on +1,172% volume. It has been consolidating ever since. It is eight days into forming a handle. The entrance pivot is the handle high of 44.10.

This is an aggressive stock due to its history of losses, expectations for more of the same, and its biotech industry group. The bull thesis here rests on its 99 RS and impressive revenue growth. For aggressive players only. Earnings expected Jan. 29 (unconfirmed).

Applied Materials (AMAT) shows earnings growth estimates of -32%/12% for ‘19/’20, while sales growth has declined in the last two quarters. A 95 RS stock in a 99 RS group, the semiconductor equipment space, with a B+ acc/dis rating.

Six days ago, price broke out of a three-month base, +9.0% on +154% volume before pulling back. AMAT sets up as a buyable pullback with entry pivot of 55.47 (Friday’s high) and suggested stop of 53.56 (Thursday’s low). Earnings expected Nov. 14 (confirmed).

For those already in the TQQQ trade, please be aware of the correlation between TQQQ and AMAT.

Crispr Therapeutics (CRSP) is a biotech on the cutting-edge of research. It was on a lot of aggressive traders’ radar screens in early ’18 before correcting in a major way. Losses are expected in ‘19/’20.

Price is working on a three-month consolidation, moving up 31% in just three days last week on a positive earnings report plus speculation of a potential takeover by Vertex Pharmaceuticals (VRTX). The stock then put in two days of handle formation Thursday and Friday.

Normally, a 31% move in just three days is not something to buy into, notwithstanding the impressive price moves each day on heavy volume. Thus, this is something that is only for very aggressive speculators to consider above either 1) the pattern high of 53.90, or 2) a cheater entrance via the handle high of 52.28. There is a 3% difference between the two entries.

The takeover speculation adds to the risk here. Earnings expected Jan. 27 (unconfirmed).

Franco Nevada (FNV) is a gold-oriented company centered on royalty streams. For gold-related issues, the fundamentals such as earnings and sales are less important than is the spot price of gold.

FNV forms an eight-week flat base with a reasonable 12% depth. The pattern high of 101.19 offers a suitable entry pivot. Earnings expected Nov. 11 (confirmed).

Stoneco (STNE) is a credit card processor which shows earnings growth estimates of 98%/43% for this year and next. Sales have grown 59% and 69% in the recent two quarters. A 93 RS stock in a 58 RS group.

Price builds a seven-month consolidation with an entrance pivot at 39.45. Earnings expected Nov. 21 (confirmed).

Wellcare Health Plans (WCG) is a growth stock in the medical-managed care group. Earnings are expected to slow from 35% this year to 13% next. Sales have grown a healthy 51% and 41% in the last two quarters. A 74 RS stock in a 49 RS group with a B- acc/dis rating.

WCG has been forming a four-month cup as part of a larger, 13-month consolidation. Wednesday, it gapped up and advanced 5.1% on +121% volume in reaction to its earnings report, barely clearing the consolidation. Thursday and Friday saw it ease back below the pivot by 2%. It is buyable above Wednesday’s high of 301.06. Earnings expected Jan. 29 (unconfirmed).

In sum, the averages and leaders tell us that the market wants to go higher. Players can begin taking pilot buy(s) if they haven’t already.

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 TQQQ, 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.