Fall

We’re down to six qualifiers for our Standard Screen of Growth Stocks. This hasn’t been so low for years. But this is good.

The broad market has mostly gone sideways for 20 months, making it very difficult to have conviction in a bias. We’ve held a neutral bias for nearly that entire period. It’s kept our powder dry. We’re ready to pounce.

These corrections separate the strong from the weak. New leaders will assert themselves. Of course, there’s always the possibility that those leaders will be bears.

The recent sell-off has triggered a Sell Bias for our strategy. Multiple distribution days suggest institutions are taking cover. Experience tells us the long, drawn out stagnation led to an abundance of pent up selling interest just waiting for a significant lower move to bail, thus the magnitude of the move.

The Sell Bias won’t change until we see institutional follow through in the form of a clear accumulation day, where an up day’s volume clearly outpaces the previous day’s. We begin looking Tuesday to give a good four days from last week’s bottom for short seller’s to clear out.

The market’s looking to this Fall. All hands on deck. Fund managers are back in the groove and ready to realign their holdings. Paying close attention to volume flow  will reveal their playbooks.

Standard Screen 

  • EPS > 20% Quarterly
  • Sales > 20% Quarterly
  • ROE > 15%
  • Price > 50 and 200 SDMA’s
  • Price > 10
  • Average volume > 300,000
  • Market Cap > $300mil

Ticker Company Industry Country Chart
ABMD ABIOMED, Inc. Medical Appliances & Equipment USA PB
AHS AMN Healthcare Services Inc. Specialized Health Services USA PB
SCMP Sucampo Pharmaceuticals, Inc. Drug Manufacturers – Other USA BO
SKX Skechers USA Inc. Textile – Apparel Footwear & Accessories USA PB
SNN Smith & Nephew plc Medical Appliances & Equipment United Kingdom L-BASE
TREE LendingTree, Inc. Mortgage Investment USA PB
  • BASE = Base
  • L-BASE = Lower Base
  • PB = Pullback
  • NH = New High
  • N = Nada

Chop ‘Em Down

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Three days of quick and heavy selling strike deep into the market’s heart. Vultures circle a bloodied and stumbling bull.  But is it dead?

Our bias shifts down to Bear mode. It’s a reflex that comes as naturally as ducking for a brick tossed at your head. No strategic reason to be long with our core strategy.

However, selling extremes of this measure more than often preclude sharp reflex rallies. In other words, jump in an index if you can stomach the volatility. Tight stop below recent lows should cap the risk nicely. Be quick, be nimble.

Oil, and the United States Oil, USO, ETF looks good. General lack of demand for commodities has warned for months of potential economic weakness.  What led us down could lead us back.

We’re also looking at relative strength winners to discern the strong from the weak. It’s too early in the week (or sell-off) to get a good handle here – though already we’re keeping an eye on the Home Construction Index, ITB, as a strong candidate. We liked what this was doing earlier in the year. Underlying trends sustain our initial observations.

There’s a lot to watch this week. Stay tuned!

Halved

Growth stocks are regrouping with the number of stocks qualifying for our screen roughly halved in this broader market pullback.

This is when the deck gets reshuffled. It’s a litmus test. The stronger of our top stocks will resume trends while the weak stagnate or drop off. Likely upside candidates will be found below as trade strong above their 50 and 200-day MA’s.

No telling what the Fall will bring. It’s all speculation. Our job is to be ready to make the best of whatever hand we’re dealt.

Bias stays at Neutral.

This screen is based on: 

  • EPS > 20% Quarterly
  • Sales > 20% Quarterly
  • ROE > 15%
  • Price > 50 and 200 SDMA’s
  • Price > 10
  • Average volume > 300,000
  • Market Cap > $300mil

Ticker Company Industry Country Chart
ABMD ABIOMED, Inc. Medical Appliances & Equipment USA NH
ADPT Adeptus Health Inc. Hospitals USA PB
AGO Assured Guaranty Ltd. Surety & Title Insurance Bermuda N
AHS AMN Healthcare Services Inc. Specialized Health Services USA PB
FIT Fitbit Inc. Scientific & Technical Instruments USA N
GPRO GoPro, Inc. Photographic Equipment & Supplies USA L-BASE
LAD Lithia Motors Inc. Auto Dealerships USA PB
PAYC Paycom Software, Inc. Application Software USA BASE
REGN Regeneron Pharmaceuticals, Inc. Biotechnology USA PB
SCMP Sucampo Pharmaceuticals, Inc. Drug Manufacturers – Other USA PB
SKX Skechers USA Inc. Textile – Apparel Footwear & Accessories USA PB
SNN Smith & Nephew plc Medical Appliances & Equipment United Kingdom BASE
SSNI Silver Spring Networks, Inc. Computer Based Systems USA BASE
UVE Universal Insurance Holdings Inc. Property & Casualty Insurance USA PB
WBA Walgreens Boots Alliance, Inc. Drug Stores USA PB
  • BASE = Base
  • L-BASE = Lower Base
  • PB = Pullback
  • NH = New High
  • N = Nada