Friday's advance, driven once again by announcements on the U.S.-China trade talks, succeeded in turning the short-term trend up.
As discussed in last week's videos, I was looking for a takeout of the recent swing high (point "A" in the chart below) in order to know the trend was once again up. This resulted in a higher high to go along with the higher low printed Tuesday. The action, which represented the first accumulation day in four weeks, also brought the Nasdaq above its 50-day and 20-day lines, obvious pluses.
A negative was Friday's poor close in the average. This resulted in a shooting star pattern which often occurs at or near the top of a trend.
Given the on-again, off-again trade talks, it is possible that a "skinny deal" may not end up being signed in the days and weeks ahead. As technical traders, we cannot predict what might occur, though we can deduce from the price action what the market's reward-to-risk ratio is.
And on that score, Friday's better action did not automatically produce a cluster of pattern setups worthy of our attention. The growth sector is still down for the count, in most cases, and will need some time to repair its broken technical patterns. With that said, a very aggressive speculator may consider a pilot buy from one of the names discussed below, most of which need more time to complete their patterns anyway. These are deemed the most attractive setups in the market.
One lesson that I hope was learned recently is that an upward trending Nasdaq does not mean one should buy every breakout in a market with very few setups and no real success rate for recent breakouts. Because there are so few setups currently, only the most aggressive players should consider one or more pilot buys from the group below.
Cardlytics (CDLX) is a leading computer software – enterprise name that did not break down during the late-summer correction in growth glamours. Losses are expected this year and next, while revenue increased 10% and 37% in the two recent quarters. The stock holds a B- acc/dis rating.
Price forms a five-week flat base with a 20% depth. It is buyable above the pattern high of 39.62. Earnings expected Nov. 7 (unconfirmed).
Datadog (DDOG) is a recent new issue in the computer software – enterprise group. No earnings growth data are available, as is the case with recent IPOs. One attraction here is revenue growth, which was a giant 91%, 83%, 76%, and 82% in the recent four quarters.
Another positive is the ability to lift as much as 53% in the opening day of trading. Currently, price forms its first base. A very aggressive player might target last week’s high of 37.97 as a cheater entrance point. Otherwise, the 41.44 pattern high serves as a traditional pivot.
Globant (GLOB) is expected to post earnings growth of 29%/25% in ‘19/’20. The IT services provider shows sales growth of 22% and 23% in the recent two quarters. A 96 RS stock in an 82 RS group with a C- acc/dis rating.
Technically, this is a classic example of a stock that has clearly formed a bottom after a 24% correction and is tracing the right side of a cup. At present, this is not actionable, but is something that will be watched for a pullback entry should price continue to close in on its pattern high. The RS line slope since the bottom four weeks ago, not shown, is compelling. Earnings expected Nov. 14 (unconfirmed).
Liveperson (LPSN) has had a checkered past in terms of earnings growth, with losses expected this year and next. Sales growth has been 14% and 15% in the two recent quarters. A 98 RS stock in an 83 RS group with a B acc/dis rating.
The stock forms a seven-week double-bottom base. It can be taken above the 41.00 pattern high. Earnings expected Nov. 7 (unconfirmed).
Model N (MODN) is a computer software – enterprise issue with an expected earnings growth rate of 56% in the September ’20 fiscal year. Sales growth has declined in the last three quarters. The stock holds an A- acc/dis rating.
Price forms a five-week flat base with an 8% depth. This is considered tight, and attractive. The stock can be taken above the 29.26 pattern high. Earnings expected Nov. 5 (confirmed).
In sum, cash remains king for most speculators.
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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 no positions, 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.