Category: Commentary

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While Chinese stocks are in a crash mode, we continue to see strength in the U.S. stock market. Last week’s pullback in momentum names seems like another normal pullback within a bull market. They say that bull markets correct through sector rotation. This is exactly what we might be seeing currently in the market as the transportation sector broke out today. There are some many truckers clearing long bases: ECHO, ARCB, XPO, etc.

The cannabis craze has revitalized the interest in many biotechs. Today, we saw a major breakout in a large-cap stock like AMGN. Institutions are looking for a side door to participate in the growth of the cannabis industry and stocks like AMGN and TPB are perking up.

We also took a look at NDAQ, CMG, MCD, SBUX, AVAV, ROKU, etc.

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The bull market continues to rage with full force. Apple has been unstoppable after its earnings gap and it’s already a 1.1-trillion-dollar company. It is looking extended to chase here. Amazon is less than 2% away from becoming the next trillion-dollar company.

We continue to see strength in enterprise software, semiconductors, cybersecurity, retailers, and more recently – biotech. After quadrupling between 2012 and 2015, the biotech ETF, IBB has spent the last four years building a new base and it is not too far from making new all-time highs. The smaller-cap biotech ETF, XBI has already passed that milestone. The renewed interest in marijuana stocks has brought new life to the whole biotech sector. It might remain in play for a long time.

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The most recent rotation has benefited the healthcare sector, so it’s rational to turn our attention to some setups in the space. I am already long ENDP, mainly because of the constructive technical action. The market loved their last earnings report. While earnings and sales growth continue to be negative, both numbers came above analysts’ estimates. More importantly, the stock gapped up and finished near the highs of its earnings day’s range. ENDP spent the following few weeks consolidating in a tight range and consistently finding buyers near $15. It looks like it ready for another leg higher as it has been perking up along with many other biotechs this week.

Looking at areas of potential technical resistance, a short-term target of $19-20 is reasonable. A move below $15 would invalidate my thesis.