September 1, 2019

The Nasdaq Composite is locked in a four-week trading range as market participants remain beholden to the latest developments from the U.S.-China trade situation.

Setting aside the trade situation, this is a market with precious few pattern setups for the aggressive growth specialist who favors base breakouts. Combining this with a subtle distribution in certain growth names provides us with scant reason to have long exposure. The names below are believed to be the most attractive technically, with just two of the three being actionable.

The following are the few titles that have pattern setups. They are listed here for two reasons: 1) In the event of a bullish turn showing strength and volume, they can be used as pilot buys, and 2) For the very aggressive player who is looking for names to own right now because he or she absolutely must have long exposure, they fit the bill.

My preference in a market like this is to stay in cash, as opposed to taking positions in one or a few of the scant few names that set up. Everything could change on short notice, but a market like this generally is not one that offers enough of a reward-to-risk ratio for risking precious capital. This does not apply to legacy positions taken earlier in the year that are being held in order to play them out for bigger gains.

Among the names, Coupa Software (COUP) is expected to post earnings growth of -39%/273% for the January ‘20/’21 fiscal years. Revenue growth has been solid, at 39% and 44% in the last two quarters. A 98 RS stock in a 95 RS group with a C acc/dist rating.

Last Monday, COUP was on the special “very aggressive” edition of the Focus List. This list was for very aggressive subscribers who sought long exposure despite a choppy, trendless tape. The next day, the stock cleared a five-week base, only to close the session below the pivot. On Friday, it was a stop out, and marked the third minor distribution day in the last six sessions.

COUP is back on the Focus List, but it is to be noted that earnings are expected Tuesday, Sept. 3 post-close. It can be taken above the Tuesday high of 148.90.

Fresh Pet (FRPT) is expected to grow its bottom line by 714% in the ’20 year. Part of this huge growth rate owes to a small base for ’19 earnings (7 cents a share in ’19E vs. ‘20E of 57 cents). Sales are steady at growth rates of 27% and 26% in the two recent quarters. A 92 RS stock in an 81 RS group with a B+ acc/dist rating.

The stock has shown remarkable price persistency, up 15 of the last 18 days, as it moves up the right side of a 10-week consolidation. At present, it stands 5% from its pattern high and is not actionable, but can be monitored for a pullback/handle/sideways drift. Earnings expected Nov. 4 (unconfirmed).

Lattice Semiconductor (LSCC) shows earnings growth estimates of 70%/21% for this year and next. Sales have been flattish for three-straight quarters. A 99 RS stock in an 84 RS group with an A- acc/dist rating. Lattice is the highest RS stock in the fabless semiconductor group.

LSCC forms a four-week shelf. There has been some light distribution within this pattern. The stock can be taken above the Aug. 22 high of 20.48. Earnings expected Oct. 29 (unconfirmed).

In sum, cash is king. Without an opinion as to what might happen, we enter September with an open mind as to what is possible.

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 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.