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

Quality Flight

Quick Take: Buy Bias. Despite significant economic uncertainty, buyers continue to step up to support growth stocks. But we’re long due for a pullback. 

Marauders:

Typical of June, a flight to quality bid shares higher as portfolio managers maneuvered to add leaders in their holdings.

Quadruple witching in the options market on Friday capped off a week that had the Nasdaq came just short of a new high. A small cap rally also added heat as the Russell 2000 index realigns itself (IWM, +2.31%). 

The Nasdaq’s +3.73% gain came on volume down 10% from last week’s heavy selling rout. It convincingly favored advancers to decliners by more than two to one. 

The S&P 500 posted posted a +1.86% gain and the Dow was +1.04% with NYSE volume off 15% from last week with advancers and decliners a near match. 

Stocks appear to be pricing in a V-shape recovery vs. the  Fed’s  U-shape prediction. The old adage that “You don’t fight the Fed,” as well as “Don’t fight the tape,” has been the winning mantra since stimulus plans were set in play. 

Friday’s heavy volume down day would be an ominous sign of institutional dumping if it weren’t for options expirations. However, the major indexes have been taking in more buy-volume than sell volume since putting in their lows in March. 

Though much uncertainty remains regarding the pandemic, which is still on, as well as what happens when stimulus money wears off, which may happen in the Fall. Let’s not forget it’s an election year and the country is going through historical social unrest. 

Covid-19 won’t kill economy. Rising infection rates in 15 states has raised fears. Though in ten of the states the increase is minor, and somewhat expected after reopening from lockdown. Rates have been falling in 16 states. 

The virus situation may be more severe for states such as Arizona, South Carolina and Alabama, which have seen more severe upticks. 

The market has rightly favored companies with business models that cater to the agoraphobic. 

Tech leadership from FB, AAPL, AMZN, NFLX, GOOG and MSFT was solid for the week. Take not that GOOG is showing relative weakness here, down -7% from its 52-week high, with the rest of the pack down less than 2%.

Internet, cloud computing, social media and esports stocks rage on.

Biotech (IBB, +7.33%) had a monumental week as it set a new high as it continues to breakout from a five year base. This was the most shorted sector, so no doubt covering  here. Though the virus has made the sector attractive for its potential to cure. 

Gold (GLD, +0.87%) holds near highs not seen in eight years, as gold miners (GDX, +2.79%) recover from pullback mode. Similar story for silver miners (SLVP, +0.34%.) 

TECHNICALLY SPEAKING, 

  • The S&P 500 is showing near-term weakness as it consolidates under a bearish island top.
  • Strength For The Week: Healthcare, Technology, Communications
  • Weakness: Utilities, Energy, Real Estate

GROWTH STOCKS

It’s breakout-palooza out there. Hit ‘em until it stops. I like to ring the cash register at 20%. Do it five times to more than double your money. 

Last week we saw from our list:

+40% in one week for this biotech.

+40% in one week for this Chinese educator.

+42% in one week for this Covid-19 vaccine hopeful.

BREAKOUTS:

ADBEAdobe IncSoftware & IT Services
APPSDigital Turbine IncSoftware & IT Services
EAElectronic Arts IncSoftware & IT Services
EPAMEpam Systems IncSoftware & IT Services
HOLXHologic IncHealthcare Equipment & Supplies
LOWLowe`s Companies IncSpecialty Retailers
PFSIPennyMac Financial Services IncBanking Services
PLMRPalomar Holdings IncInsurance
RAPTRapt Therapeutics IncBiotechnology & Medical Research

BASES

ALGNAlign Technology IncHealthcare Equipment & Supplies
BLFSBiolife Solutions IncHealthcare Equipment & Supplies
CORTCorcept Therapeutics IncPharmaceuticals
CPRXCatalyst Pharmaceuticals IncBiotechnology & Medical Research
DHXDHI Group IncProfessional & Commercial Services
FNDFloor & Decor Holdings IncSpecialty Retailers
GDDYGoDaddy IncSoftware & IT Services
KKellogg CoFood & Tobacco
LAKELakeland Industries IncTextiles & Apparel
LLLumber Liquidators Holdings IncSpecialty Retailers
MVISMicroVision IncElectronic Equipment & Parts
RMDResmed IncHealthcare Equipment & Supplies
SHWSherwin-Williams CoChemicals
SITESiteOne Landscape Supply IncFood & Tobacco

TOP INDUSTRY GROUPS, RANKED BY PROXIMITY TO 52-WEEK HIGH

Global X Social Media ETF (XNAS:SOCL)
Invesco NASDAQ Internet ETF (XNAS:PNQI)
VanEck Vectors Video Gaming and eSports ETF (XNAS:ESPO)
First Trust Cloud Computing ETF (XNAS:SKYY)
Invesco Dynamic Software ETF (ARCX:PSJ)
Amplify Online Retail ETF (XNAS:IBUY)
Global X Future Analytics Tech ETF (XNAS:AIQ)
Invesco Dynamic Networking ETF (ARCX:PXQ)
Sea Ltd (XNYS:SE)
SPDR S&P Health Care Equipment ETF (ARCX:XHE)

Get on, play it safe.

Dan

Market Bias, June 18

Updated 06/17/16

498px-Yellow_flag_waving.svgNO Bias

Bulls and Bears alike need to take caution, say the volume and price trend indicators.

Accumulation/ Distribution*
S&P 500 6/5
NASDAQ 4/5
DOW 30 3/6

No clear dominance in volume to suggest institutions are buying or selling in mass.

Sector Bias

Ticker ETF Bias
FDN First Trust Dow Jones Internet Index Fund +
IGE iShares North American Natural Resources ETF +
IGN iShares North American Tech-Multimedia Networking ETF +
IGV iShares North American Tech-Software ETF +
IHI iShares U.S. Medical Devices ETF +
IYZ iShares U.S. Telecommunications ETF +
OIH VanEck Vectors Oil Services ETF +
PPA PowerShares Aerospace & Defense Portfolio +
QTEC First Trust NASDAQ-100-Technology Sector Index Fund +
SMH VanEck Vectors Semiconductor ETF +
XLB The Materials Select Sector SPDR Fund +
XLE The Energy Select Sector SPDR Fund +
XLI The Industrial Select Sector SPDR Fund +
XLK The Technology Select Sector SPDR Fund +
XLP The Consumer Staples Select Sector SPDR Fund +
XLU The Utilities Select Sector SPDR Fund +
XLV Health Care Select Sector SPDR ETF +
XME SPDR S&P Metals & Mining ETF +
KIE SPDR S&P Insurance ETF
XLY The Consumer Discretionary Select Sector SPDR Fund
IBB iShares Nasdaq Biotechnology ETF
IYT iShares Transportation Average ETF
KBE SPDR S&P Bank ETF
KCE SPDR S&P Capital Markets ETF
KRE SPDR S&P Regional Banking ETF
PPH VanEck Vectors Pharmaceutical ETF
XHB SPDR S&P Homebuilders ETF
XLF The Financial Select Sector SPDR Fund
XRT SPDR S&P Retail ETF

Not quite a bull market anymore as bank stocks trend below their major MA’s, as well as lackluster action from retail, a traditionally decent measure of economic health.

Price Performance, Ranked By YTD

Rank Ticker Perf Week Perf Month Perf Quart Perf Half Perf Year Perf YTD
1 XME -1.80% 7.38% 13.07% 61.23% -9.10% 56.79%
2 XLU 0.16% 4.46% 3.76% 22.11% 22.36% 18.21%
3 IGE -4.05% 0.06% 5.96% 12.70% -11.82% 15.19%
4 IYZ 1.11% 5.01% 6.53% 13.86% 8.09% 11.34%
5 XLE -3.21% 0.38% 5.28% 8.70% -11.00% 11.28%
6 XLB -1.81% 1.57% 4.41% 9.52% -4.22% 9.15%
7 OIH -6.31% 2.59% 3.11% 2.14% -19.97% 7.86%
8 IHI -2.46% 2.29% 11.66% 8.85% 11.17% 7.76%
9 XLP -0.15% 2.82% 2.45% 8.74% 14.21% 7.52%
10 XLI -2.01% 0.96% 1.51% 7.21% 2.69% 6.16%
11 SMH -2.32% 8.49% 4.00% 5.08% 0.86% 5.78%
12 PPA -1.95% 1.58% 6.43% 6.38% 3.68% 4.69%
13 IGV -1.26% 4.14% 7.45% 2.53% 4.13% 2.51%
14 XLK -1.69% 2.78% 0.07% 1.55% 3.93% 2.20%
15 KIE -3.17% -0.35% 1.42% 1.51% 2.14% 1.38%
16 QTEC -1.82% 5.88% 1.72% 0.39% -2.55% 1.31%
17 IYT -4.27% -0.50% -4.82% 0.49% -8.13% 1.05%
18 XLY -1.25% 0.80% 0.44% 0.11% 3.23% 0.63%
19 XLV -1.77% 2.49% 7.59% -0.06% -3.77% -0.96%
20 IGN -1.85% 5.49% 0.69% -0.77% -9.08% -2.29%
21 FDN -0.95% 4.57% 7.96% -2.74% 7.26% -2.55%
22 XHB -3.66% 0.70% 0.36% -3.49% -8.64% -2.98%
23 XLF -2.99% -0.52% 1.08% -4.29% -7.22% -4.01%
24 XRT -2.27% 1.57% -9.64% -4.92% -16.44% -4.35%
25 KRE -5.64% 0.23% 1.84% -8.44% -11.06% -7.49%
26 KBE -5.83% -0.80% 0.84% -9.82% -14.00% -8.37%
27 PPH -3.23% 0.30% 2.72% -10.53% -18.49% -11.28%
28 KCE -4.78% -0.68% -2.86% -11.62% -25.81% -12.75%
29 IBB -4.23% 1.09% 6.10% -20.55% -28.46% -22.52%

Late bull market cycle in the works with Metals and Utilities well bids this year.

 

Sellers Test 50

spx_100313

Four official, albeit light, days of distribution in the past five session tells us we’re seeing some funds unload as the major indexes test their 50-day moving averages. 

The 50 is key. Either we’ll see sell volume dry up in here or it picks up in this zone. As is, all major sectors are trending above their major moving averages. Any deterioration of this number will suggest more may come. 

Stud Screen

Future top earners are screened for as we look for 30% growth or more in earnings over the next five years, weeding out false promises as we also screen for those with current sales showing more than 30% growth, and further drilling it down to only solidly profitable companies with return on equity of 15% or better. This is the Stud Screen:

Ticker Company Sector Industry Country
ATHL Athlon Energy Inc. Basic Materials Independent Oil & Gas USA
BBSI Barrett Business Services Inc. Services Staffing & Outsourcing Services USA
DDC Dominion Diamond Corporation Basic Materials Nonmetallic Mineral Mining Canada
GEOS Geospace Technologies Corporation Technology Scientific & Technical Instruments USA
GGAL Grupo Financiero Galicia S.A. Financial Foreign Regional Banks Argentina
GMK Gruma S.A.B. de CV Consumer Goods Processed & Packaged Goods Mexico
HCLP Hi-Crush Partners LP Basic Materials Industrial Metals & Minerals USA
MDC MDC Holdings Inc. Industrial Goods Residential Construction USA
PGTI PGT, Inc. Industrial Goods General Building Materials USA
RYL Ryland Group Inc. Industrial Goods Residential Construction USA
TIVO TiVo Inc. Services CATV Systems USA
WETF WisdomTree Investments, Inc. Financial Asset Management USA
WGO Winnebago Industries Inc. Consumer Goods Recreational Vehicles USA
YY YY Inc. Technology Internet Information Providers China

DDD-ynomite?

3dSys

The pressure is on for recent breakout 3D Systems Corp. (DDD) to give us another profitable climb. This stock, which made our year in January, looks poised to do it again with a clean, high-volume push out of its four month base. 

It’s good that we’re not seeing any heavy distribution at these levels. We won’t be surprised to see a test of the 50-day average. Perhaps not coincidentally, the $50 price marker is also in play as a psychological hurdle. Longs are likely to get spooked somewhere, somehow in this early stage.

Looking under the hood,  this maker of 3D printers sold to pros and amateurs has a market cap of $5B with yearly sales of more than $400M, grown at a 40%+ clip, with earnings of nearly $40M, representing 12% growth. Debt of more than $30M with 6% return on equity leaves much to be desired. But it’s ok. The sector is still well bid. We’ll see if the broader market supports it. Analysts, as a group measured by Yahoo!, see growth at 30% next year

ddd_091113

Market’s Strongest

Symbol Company Name
ACT Actavis Inc
AEL Amer Equity Invstmt Life
AFOP Alliance Fiber Optic
ALKS Alkermes Plc
ALR Alere Inc
ALXN Alexion Pharmaceuticals
AMCX Amc Networks Inc
AMP Ameriprise Financial Inc
AMTD T D Ameritrade Hldg Corp
APC Anadarko Petroleum Corp
ARMH A R M Holdings Plc Ads
ARRS Arris Group Inc
AZPN Aspen Technology Inc
BBY Best Buy Co Inc
BCEI Bonanza Creek Energy Inc
BDBD Boulder Brands Inc
BKW Burger King Worldwide
BLMN Bloomin’ Brands Inc
BRFS B R F S A Adr
BWLD Buffalo Wild Wings Inc
CAVM Cavium Inc
CBI Chicago Bridge & Iron Co
CDW C D W Corp
CHK Chesapeake Energy
CLR Continental Res Inc
CMCSA Comcast Corp Cl A
CMG Chipotle Mexican Grill
COG Cabot Oil & Gas Corp
COL Rockwell Collins Inc
CONN Conns Inc
CREE Cree Inc
CRZO Carrizo Oil & Gas Inc
CTRX Catamaran Corp
CXO Concho Resources Inc
DAL Delta Air Lines Inc
DDD Three D Systems Corp
DPZ Dominos Pizza Inc
DRC Dresser-Rand Group Inc
DRQ Dril Quip Inc
EAT Brinker International
EGN Energen Corp
EQT E Q T Corp
EVR Evercore Partners Inc
EVTC Evertec Inc
EXH Exterran Holdings Inc
EXP Eagle Materials Inc
EXPR Express Inc
FANG Diamondback Energy Inc
FB Facebook Inc Cl A
FIRE Sourcefire Inc
FNSR Finisar Corporation
FRAN Francesca’s Hldgs Corp
FRC First Republic Bank
FXCM F X C M Inc Cl A
G Genpact Ltd
GBCI Glacier Bancorp Inc
GME Gamestop Corp Cl A
GNC G N C Holdings Inc
GWRE Guidewire Software Inc
HAIN Hain Celestial Group
HAL Halliburton Company
HLSS Home Loan Servicing Slt
HOG Harley Davidson Inc
HOS Hornbeck Offshore Svcs
HTSI Harris Teeter Supermkts
IACI I A C/Interactivecorp
ICON Iconix Brand Group Inc
IM Ingram Micro Cl A
IP International Paper Co
IVZ Invesco Ltd
JAZZ Jazz Pharmaceuticals Plc
JBHT Hunt J B Trans Svcs Inc
JCI Johnson Controls Inc
KKD Krispy Kreme Doughnuts
LAZ Lazard Ltd Cl A
LII Lennox International Inc
LKQ L K Q Corp
LL Lumber Liquidators Hldgs
LLY Lilly Eli & Co
LNKD Linkedin Corp Class A
LOW Lowes Companies Inc
LVS Las Vegas Sands Corp
LZB La-Z-Boy Inc
MAN Manpowergroup
MCHP Microchip Tech
MELI Mercadolibre Inc
MEOH Methanex Corp
MHK Mohawk Industries Inc
MMS Maximus Inc
MPEL Melco Crown Entertmt Ads
MTZ Mastec Inc
NDLS Noodles & Company Cl A
NFLX Netflix Inc
NKE Nike Inc Cl B
NQ Nq Mobile Inc Ads
NSM Nationstar Mtg Hldgs Inc
NTAP Netapp Inc
NUS Nu Skin Enterprise Cl A
NXPI Nxp Semiconductors N V
NYX N Y S E Euronext
OCN Ocwen Financial Corp
OCR Omnicare Inc
ORLY O Reilly Automotive Inc
OSTK Overstock.Com Inc
PCLN Priceline.Com Inc
PFG Principal Finl Group Inc
PII Polaris Industries Inc
PKG Packaging Cp Of America
PNK Pinnacle Entertainment
PPC Pilgrims Pride Corp
PRAA Portfolio Recovery Assoc
PRLB Proto Labs Inc
PRU Prudential Financial Inc
PXD Pioneer Natural Resource
QCOM Qualcomm Inc
QCOR Questcor Pharmaceuticals
QLIK Qlik Technologies Inc
REXX Rex Energy Corp
RKT Rock Tenn Co Cl A
RP Realpage Inc
SAVE Spirit Airlines Inc
SBUX Starbucks Corp
SEE Sealed Air Corp
SGY Stone Energy Corp
SINA Sina Corporation
SKX Skechers U S A Inc Cl A
SM S M Energy Co
SN Sanchez Energy Corp
SPWR Sunpower Corp
STI Suntrust Banks Inc
STZ Constellation Brands A
SWFT Swift Transportation A
SYNA Synaptics Inc
TNGO Tangoe Inc
TOWR Tower International Inc
TRN Trinity Industries Inc
TSN Tyson Foods Inc Cl A
TSS Total System Services
TTWO Take-Two Interactv Sftwr
UA Under Armour Inc Cl A
UBNT Ubiquiti Networks Inc
ULTA Ulta Salon Cosm & Frag
V Visa Inc Cl A
VC Visteon Corporation
VIAB Viacom Inc Cl B
VRX Valeant Pharmaceuticals
WAC Walter Investment Mgmt
WAGE Wageworks Inc
WAL Western Alliance Bancorp
WCG Wellcare Health Plans
WCN Waste Connections Inc
WHR Whirlpool Corp
WLK Westlake Chemical Corp
WLL Whiting Petroleum Corp
WTR Aqua America Inc
WWAV Whitewave Foods Co Cl A
WWW Wolverine World Wide Inc
WWWW Web.Com Group Inc
XEC Cimarex Energy Co
ZION Zions Bancorp

Buyer’s Caution, Bias Shift



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Buyer's Caution

We've shifted our bias down to Buyer's Caution as multiple distribution days, a lack of leadership and an expected seasonal shift in sentiment appear to have set in for awhile. This is our first bias shift all year. We're happy to have been on the right side of the market for the last six months despite staying on the lookout for a 5% pullback in the major indexes.

Enjoy your summer.