Momentum Monday – Can Emerging Markets’ Weakness Spread to U.S. Stocks?

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While most emerging markets are under pressure, U.S. stock indexes are still trading near all-time highs. How long can this decoupling persist?

Can the record corporate earnings and sales growth alleviate the fear of emerging markets’ contagion? So far the answer is a resounding Yes as dip buyers continue to be active on the slightest pullbacks.

It’s not all sunshine and rainbows in the U.S. markets either. While retailers and software stocks are crushing estimates and breaking out, homebuilders are near 52-week lows. Maybe rising interest rates are finally starting to matter for some sectors or at least the market believes they will matter for future earnings.

We also go over some new ideas.

Is Match Group Ready To Break Out To New All-Time Highs?

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Match Group, which owns Tinder and various other dating applications crushed earnings estimates again and it is trading near $44 per share in the after-hours session. They reported earnings per share of $0.41 vs $0.16 for the same quarter last year. Analysts expected $0.35. The surprise is not huge but it might be enough to fuel some upside momentum tomorrow.

Keep in mind that 50% of MTCH’s 62 million shares float is short. The short sellers are backed against the wall and they will try to fade MTCH tomorrow morning. If MTCH can stay above $45 after the market opens on Wednesday, we might see it attack its all-time highs near 48.65. Above it, there’s a potential for a monster short squeeze.

Here’s Tinder’s Chief Product Officer, Brian Norgard on the latest numbers:

Momentum Monday – The Next One-Trillion-Dollar Company and Some Ideas for August

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Chinese tech stocks might be trouble but their U.S. counterparts are hitting of all cylinders. And there are good fundamental reasons: 75% of the S&P 500 companies reported earnings already. So far, the average year-over-year earnings growth is 30%, the average y/y sales growth is 10%. We haven’t seen such high growth rates since 2010.

We take a look at some new and some old ideas: SEND, DOCU, FIVE, NKE, DIS, BL, MELI, NVDA, AAPL, TWLO, ETSY, AMGN, SGEN, MYGN, and others.

Momentum Monday – FANG Under Pressure and The Future of Fintech

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There’s no better indicator of market sentiment than the price action in momentum stocks. Tech momentum stocks have been obliterated in the past couple of days. This is nothing new. What’s more important is if they are able to muster a bounce again.

The recent market reaction to tech stocks’ earnings reports can be a concern for bulls. It’s not normal to see 20% one-day drops in large-cap tech leaders like Facebook and Twitter. In a strong bull market, bad news tends to be quickly forgiven. Add to that the lack of enthusiasm about Amazon’s and Google’s huge numbers, and you have plenty of reason to hedge or decrease long market exposure.

Dip buying has been working flawlessly for most of 2018, which explains why the current market is a little bit complacent. While many momentum stocks are getting murdered, the VIX is barely up. VIX tends to rally when the demand for SPY’s put options for protection or speculation skyrockets.

Another Strong Quarter for Servicenow

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Who says that you cannot make money in IPOs anymore because nowadays most companies go public very late in their growth cycle? Servicenow (NOW) made its debut as a publicly traded company in 2011 and since then its stock is up almost 1000% and reached a market cap of $34 Billion.

No mid-cap stock can go up 10X in six years if it relies only on a good story and expectations of future growth. Serivcenow has the growth to back up its price appreciation. In 2011, it made 4 cents per share. In 2018, it is expected to make $2.40 per share.

NOW reported another impressive quarter today. Its Q/Q earnings growth accelerated to 123% compared to 81% and 46% in the previous two quarters.

Keep in mind that the growth number is irrelevant if it doesn’t exceed market expectations. Look at NFLX which reported 467% earnings growth and it is still trading 20% below its all-time highs.

If the market is in a good mood, even a small surprise can lead to new 52-week highs and a sustained uptrend because happy people are willing to pay happy prices. A more cautious market needs a much bigger surprise to launch a new powerful trend.

NOW surprised by only 13%, which explains the lack of enthusiasm in the market about their huge growth numbers. Even its volume today was not that impressive. Typically, big new trends are started by breakouts on at least 3X the average daily volume.

Either way, I am bullish on NOW. A move above 195 might rekindle its momentum and lead to a quick spike – first to 200 and then to 220.