GSRTrades July 24, 2020

THE GROWTH STOCK REPORT 

Broken bullish patterns limit optimism for our beloved growth stocks.

BREAKOUTS

AEYEAudioEye, Inc.Internet Software/Services
ALNYAlnylam Pharmaceuticals, IncBiotechnology
CHGGChegg, Inc.Miscellaneous Commercial Services
CRSPCRISPR Therapeutics AGBiotechnology
CRWDCrowdStrike Holdings, Inc. Class APackaged Software
IMMUImmunomedics, Inc.Biotechnology
NKNantKwest, Inc.Biotechnology
PAASPan American Silver Corp.Precious Metals
RAREUltragenyx Pharmaceutical, Inc.Biotechnology
RMBLRumbleOn, Inc. Class BInformation Technology Services
SEDGSolarEdge Technologies, Inc.Electrical Products
TNDMTandem Diabetes Care, Inc.Medical Specialties
TTDTrade Desk, Inc. Class AAdvertising/Marketing Services
WRTCWrap Technologies, Inc.Industrial Conglomerates
ZMZoom Video Communications, Inc. Class APackaged Software

BASES

ALBOAlbireo Pharma, Inc.Pharmaceuticals: Other
AXNXAxonics Modulation Technologies, Inc.Medical Specialties
CGENCompugen Ltd.Biotechnology
DRNADicerna Pharmaceuticals, Inc.Biotechnology
EXASExact Sciences CorporationBiotechnology
OCULOcular Therapeutix IncPharmaceuticals: Major
OROsisko Gold Royalties LtdPrecious Metals
OTRKOntrak, Inc.Medical/Nursing Services
STNEStoneCo Ltd. Class APackaged Software
XLRNAcceleron Pharma IncBiotechnology
ZZillow Group, Inc. Class CInformation Technology Services

Tech Pullback

Quick Take: Buyer’s Bias. Leadership takes a hit as the broader market pulls back.

Dear Reader,

There is very little to inspire buyers these days. The bias remains bullish here as long as institutional grade selling remains absent and price holds above major moving averages. 

FOR THE WEEK:

INDEXCLOSE% CHANGEYTD %
DJIA26469.89-0.8-7.2
Nasdaq10363.18-1.315.5
S&P 5003215.63-0.3-0.5
Russell 20001467.55-0.4-12

Profit taking in the Nasdaq saw many strong names come back closer to earth. 

US relations with China remain at a low with the closure of the Chinese consulate in Houston, and the reciprocated action of closing the US consulate in Wuhan.

President Trump said the coronavirus will likely get worse before it gets better. 

Consumer spending will take a hit this fall if Treasury Secretary Mnuchin’s plan of reducing unemployment benefits to 70% of what people were earning.

Gold hit another high as the Dollar hit a low. Defense under uncertainty is to be discerned from these types of moves. 

Expect good earnings news to come out early in season for second quarter announcements. Bad news will likely come later, presenting a sentiment challenge for the bulls. 

TECHNICALLY SPEAKING

  • Total volume for the week held pace with last week. Bulls held a slight edge with advance/decline ratios of 1.1 and 1.2 for the NYSE and Nasdaq. 
  • The NYSE saw a 12% increase in new highs to 240.
  • Both the NYSE and Nasdaq had a 9% decrease of new low as they notched in 20 and 64 respectively. 
  • On the Advance/Decline front, the bull cooled from last week as the NYSE posted a barely bullish 1.4 and the Nasdaq a barely bearish 0.8

WEEKLY SECTOR ACTION

Tech took a step back for the week as discretionary showed a bullish vote for the economy with its holdings in retail, automobiles, consumer durables, apparel, hotels, and restaurants.

SCTRNAME% CHG
Consumer Discretionary Sector FundXLY1.7
Energy Sector FundXLE0.82
Consumer Staples Sector FundXLP0.54
Financial Sector FundXLF0.32
Materials Sector FundXLB0.31
Utilities Sector FundXLU0.07
Industrial Sector FundXLI-0.16
Real Estate Sector FundXLRE-0.22
Communication Services Sector FundXLC-0.56
Health Care Sector FundXLV-0.79
Technology Sector FundXLK-1.63

LEADERSHIP

Tesla (TSLA, -5.59%) sold off for the second week in a row. This electric car/technology company has been more of a read on sentiment than a solid investment. Its market cap has it as a potential new member of the S&P 500.

As a group, traditional leadership from the FAANG and friends declined with 50-day moving averages poised to serve as support. 

Facebook (FB, -4.68%), Apple (AAPL, -3.85%), Netflix (NFLX, -2.54%) Google (GOOG, -0.24%.) 

Microsoft (MSFT, -0.78%) reported lower than expected growth for its cloud server business Azure.   

Amazon (AMZN, +1.58%) bucked the trend here as its pandemic friendly business continues to thrive. 

Please refer to The Growth Stock Report for individual stock setups. 

Play smart, play safe.

Dan

Corona Drift

Quick Take: Buy Bias. Fed fueled buying ignores weak business and economic data. 

FOR THE WEEK

For all the reasons to sell amidst this coronavirus infected economy, the market just doesn’t.

The market will continue to drift higher until it doesn’t.  

INDEXCLOSECHANGE% CHANGEYTD %
DJIA26671.95596.652.3-6.5
Nasdaq10503.19-114.25-1.117.1
S&P 5003224.7339.691.2-0.2
Russell 20001473.3250.643.6-11.7

Money shifted into value oriented Industrials, Materials and Healthcare this week as the tech gorillas cooled with a pullback. 

Watch for growth stocks as a group to cool off as funds take profits from a legendary rally. Though opportunities still abound for new breakouts. 

Big dividend payers remain a thing. Watch how the Dow doesn’t sell off as hard as the S&P 500 and Nasdaq on down days. Treasuries won’t yield much as the government promises to keep rates low for a couple of years.

Optimism is growing on the covid-19 vaccine front as a collaboration with Pfizer (PFE, +1.15%) and BioNTech (BNTX, +11.21%) received fast-track designation from the FDA.  

Moderna’s (MRNA, +51.49) had reported a positive first phase in its study.  Novavax (NVAX, +48.89%) also continues to receive votes of hope as its stock teared higher for another week.

The market’s V recovery continues to be supported by economic data.  

The trend in job recovery continues, though about a third of the jobs lost during the virus lockdown have been recovered, according to US employment data released Thursday.

As the band plays upbeat, a darker reality threatens with the coronavirus. 

States making up nearly a third of the US economy reported a fearsome uptick in covid-19 cases. California, Texas, Florida and Arizona are taking measures to counter the spread.  

There’s no guidebook for this. We simply don’t know what to expect as the pandemic plays out. 

No one expects year over year earnings for the second quarter to be good. The attention will go to guidance, as usual.

Analysts may have predicted the worst for companies struggling during lockdown, look for surprises, and more importantly the reactions to those surprises.

Big banks reporting earnings largely beat estimates as a group. But uncertainty in the market has led them to reserving more cash for failed loans. 

News reactions were a mixed bag for the six largest banks reporting: Citigroup (C, -4.62%), JPMorgan (JPM, +1.96%), Wells Fargo (WFC, -2.04%), Goldman Sachs (GS, +2.85%), Bank of America (BAC, -3.33%) and Morgan Stanley (MS, +5.24%.)

Lack of participation in this bull market from the financials does not bode well for business. Price action on the Financial sector ETF  (XLF, +2.09%) is not supporting a rosy future as it continues to struggle with mostly sideways chop.

LEADERSHIP

Tech leadership tests its bullish form with sizable drops. Let’s call it profit taking after huge runs since March. 

Facebook (FB, -1.24%), Apple (AAPL, .42%) Amazon (AMZN, -7.44%), Netflix (NFLX, -10.16%) Google (GOOG, -1.7%) Microsoft (MSFT, -5.05%)  

Netflix (NFLX) shares fell 10%, with a bulk of those losses coming after the company issued cautious subscriber guidance at the end of the week.

Gold (GLD, +0.55%) and Biotech (IBB, +3.41) have their breakouts intact. These have been the drivers in the Materials and Healthcare sectors. 

TECHNICALLY SPEAKING

Picture Perfect Breakout Setup
  • The S&P 500 is poised for another breakout as it trends above its major moving averages, just 5% from its 52-week high.
  • NYSE volume was 7% lower than last week as edged out sellers with a 1.2 ratio.
  • Nasdaq volume was 10% higher as buyers prevailed with a 1.7 ratio.
TICKERINDUSTRY ETF% CHG
XLIIndustrial Sector Fund5.87
XLBMaterials Sector Fund5.47
XLVHealth Care Sector Fund5.14
XLUUtilities Sector Fund4.22
XLEEnergy Sector Fund3.24
XLPConsumer Staples Sector Fund2.16
XLFFinancial Sector Fund2.09
XLYConsumer Discretionary Sector Fund0.4
XLREReal Estate Sector Fund0.06
XLCCommunication Services Sector Fund-0.5
XLKTechnology Sector Fund-1.16

GROWTH STOCKS

Buyer’s Bias intact. Opportunities abound.

BREAKOUTS

AEYEAudioEye, Inc.Internet Software/Services
ALNYAlnylam Pharmaceuticals, IncBiotechnology
CHGGChegg, Inc.Miscellaneous Commercial Services
CRSPCRISPR Therapeutics AGBiotechnology
CRWDCrowdStrike Holdings, Inc. Class APackaged Software
IMMUImmunomedics, Inc.Biotechnology
NKNantKwest, Inc.Biotechnology
PAASPan American Silver Corp.Precious Metals
RAREUltragenyx Pharmaceutical, Inc.Biotechnology
RMBLRumbleOn, Inc. Class BInformation Technology Services
SEDGSolarEdge Technologies, Inc.Electrical Products
TNDMTandem Diabetes Care, Inc.Medical Specialties
TTDTrade Desk, Inc. Class AAdvertising/Marketing Services
WRTCWrap Technologies, Inc.Industrial Conglomerates
ZMZoom Video Communications, Inc. Class APackaged Software

BASES

ALBOAlbireo Pharma, Inc.Pharmaceuticals: Other
AXNXAxonics Modulation Technologies, Inc.Medical Specialties
CGENCompugen Ltd.Biotechnology
DRNADicerna Pharmaceuticals, Inc.Biotechnology
EXASExact Sciences CorporationBiotechnology
OCULOcular Therapeutix IncPharmaceuticals: Major
OROsisko Gold Royalties LtdPrecious Metals
OTRKOntrak, Inc.Medical/Nursing Services
STNEStoneCo Ltd. Class APackaged Software
XLRNAcceleron Pharma IncBiotechnology
ZZillow Group, Inc. Class CInformation Technology Services

Control your loses, let your winners run.

Dan