Despite the averages being in uptrends, this is a market best left alone on the long side.
The market has made itself clear by penalizing growth stock breakouts. Let’s keep precious capital intact by heeding this message and refraining from fresh-money buys.
It is to be noted that identifying a growth stock forming a base and buying the breakout is a risky proposition in a market such as this. When they raid the brothel, they usually get everyone, including the piano player.
The game plan will be to selectively short former leading growth stocks while being alert to buying inverse index ETFs that present themselves. The Focus List has no long ideas going into Monday.
Regarding the short side, I have operated under a logical rule that shorts should only be taken when the trend in the averages is down. However, following Friday’s session, this rule has been modified in the presence of a whole sector – in this case, growth – falling apart.
Thursday night research showed these former leading growth stocks as being vulnerable to selling and, had this been a down market, shortable on Friday:
Coupa Software (COU)
Epam Systems (EPAM)
Tandem Diabetes Care (TNDM)
Arrowhead Pharma (ARWR)
These are not actionable currently, but provide an idea as to what is deemed attractive.
Shopify (SHOP) is also vulnerable, however I show the stock as being hard to borrow for short sellers.
Among the names, Costar Group (CSGP) is shortable below 569.44 with a suggested stop pivot of 585.76, for 3.0% risk.
Novocure (NVCR) is shortable below 78.69 with a suggested stop pivot of 81.05, for 3.0% risk.
In sum, long positions are out of the question presently. Short-selling may not be for all players, but it is the sole place of opportunity for the time being. Otherwise, cash is king. Stay tuned.
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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.