With both Powell and Yellen simultaneously easing financial conditions, Christmas came early for equities, with new leadership quickly asserting itself. Encouraging to see the # of Net New highs on the NYSE inflect so quickly to 4-month highs:
Trading often becomes a slippery and dangerous slope when operating with a specific directional bias. After strategically covering our shorts at the end of the previous week, we entered last week open to all possibilities. As new leaders began to emerge, we quickly expanded our book by buying into a # of them sprinting to new highs.
We like Arista Networks, Inc. (ANET), one of the first names to break out. Blue skies ahead:
Not only are ANET’s technical attributes pristine, so too are its fundamentals.
Arista’s Ethernet products provide low latency, a critical ingredient needed to scale AI/ML applications seamlessly by allowing cluster nodes to communicate with each other in real time.
After growing its earnings 800% in eight years, are forward numbers on ANET too low? For us, yes.
We plan to add to ANET on dips to $205-$208. $220-$225 is the Price Target zone by Thanksgiving/early Dec.
Our stop on ANET – for that matter, all the longs/longs of interest in this weekly piece - will be a close of 2% below the 10-day EMA.
Was Pinterest, Inc. (PINS) the prettiest girl at last week’s dance with its seductive 2-year weekly base breakout? We think so:
We like PINS on dips to the top of its recent 2-year trading range, $30.50 down to $29.85.
We are long Nov 28 & Dec 30 calls. For the Nov’s, the PT zone is $32.50-$33.50. Decembers $34.50-$35.00:
(Put on the headphones. Turn it up - this is going to be a long piece)
From 2021 to 2025, PINS earnings are set to grow 200%+:
And, yet, with Amazon in full swing exiting 2024, $1.80 seems viable by 2025. By then, PINS’ EBITDA margins should be north of 30%, a strong dispersion, relative to current consensus.
$40 looks achievable by next Spring…
Turning to Godaddy, Inc. (GDDY) …man, its 5-Year Monthly is gorgeous:
Count me in on any dips from $85, down to $83, the top of its early ’23 highs, especially with the stock’s Relative Strength Line accompanying its price breakout:
Godaddy’s earnings are poised to grow 40% from 2023 to 2025. What does the stock do if earnings beat consensus by 10%-20%?
70% odds GDDY goes to $115-$125 in 2024.
Is $90-$92 doable in the near-term? Looks so.
BGC Group, Inc. (BGC) – a broker with a focus on bonds - looks perfectly positioned to be one of the best beneficiaries of the continued volatile swings in the bond market the next 3-5 years.
BGC has many attractive qualities, including an undervalued stock, a A-Grade management team – Howard Lutnick is a proven winner – and forward estimates with clear upside due to multiple, recently launched new product releases (especially, with volatility in bond prices poised to inflect further whenever the bond vigilantes return to doling out fiscal discipline to the $33.5 Trillion in US Debt).
How much will BGC’s multiple expand should earnings for 2025 come in at $1.25? A brief overshoot to a 10x P/E multiple would get us nearly a double from here:
We love stocks making all-time highs the most, the ones forging to 10-year highs nearly as much.
5-year breakouts are great too.
We are long BGC, which is knocking on the door to 5-year highs at $6.40, a level we will add to our Dec 5 Call position:
Palantir Technologies, Inc. (PLTR) is another new long of ours.
$20+ seems likely the next 1-2 weeks. Is $22.50-$23.50 a viable PT zone by year-end? Yup…
We are looking to AGGRESSIVELY add on dips to $18.25-$18.50, a high-conviction, near-term support zone:
Clearly, the market sees big upside to the already impressive 48% EPS Growth rate from 2024 to 2025:
Bill Gross has the hot hand. After nailing his short on the long-end, Gross also recently bought into the Regional Banks (KRE). While more time may be needed, the regional bank group appears to be putting in a classic Stan Weinstein bottom.
There is a big gap fill area from $43.30 down to the low $42s; this is the buy zone next week. We will add to our long position in the KRE Dec 30 calls there. A move to the 200-day at $45.20 should net roughly 35% from where the calls closed on Friday:
It took 4x for Micron Technology, Inc. (MU) to clear $72:
Once $72 was taken out in Micron, we bought in automatically as we had previously visualized. We left room to add on dips with it being up so much last week. While overbought in the near-term, $71.5-$72 should now serve as strong support. We plan to add more to our Dec 70 call position there.
$76-$78 is our near-term PT zone in the name.
Dell Technologies, Inc. (DELL) has formed a classic Mark Minervini Volatility Contraction Pattern (VCP).
$70 is our upside buy zone. Once it is cleared, DELL should challenge its 52-week highs, where we will be scaling out of half our position.
Thereafter, it should grind to $73-$74.50, the secondary sell zone for our Nov 67.5 call position:
400% EPS growth for AXON Enterprise, Inc. (AXON), formerly Taser, is poised to manifest from 2021-2025.
223% EPS growth in 2023 makes AXON a prime leadership candidate:
Source: Bloomberg
AXON’s base is prolific. It extends back almost three years:
We are long the Dec 210 calls.
These options could double (or, also, go to zero in a bad miss/guide down scenario) if AXON breaks out after its earnings come out Tuesday afternoon.
We are very small in the name; we will add aggressively if AXON busts to new all-time highs. 65% odds it does so, especially considering the company smashed consensus last quarter:
Deckers Outdoors Corp (DECK) quickly sprinted to $600 last week.
We would like to see DECK tighten up the next few days; $580-$590 is the buy-the-pullback zone next week. By week’s end we would then be willing to top off our position in DECK on any close above $600:
I challenge anyone to please send me a better-looking forthcoming EPS and EBITDA inflection in 2023-2025 than what is poised to unfold at DraftKings Inc. (DKNG)… (For me, ELVA, comes immediately to mind):
DKNG is attempting to clear a bit of a sloppy 13-week base.
This base sits within a much bigger and constructive long-term Cup-n-Handle formation. We attach 65% odds DKNG can push to $40 by year-end:
New leadership from the likes of DoorDash, Inc. (DASH) is another reason for our surprising/enhanced bullish positioning.
We are waiting to buy in on dips to $88-$90, a former subtle resistance zone that should now serve as a high reward-to-risk entry zone. Its lagging RSI line, along with the stock breaking out from the middle part of its base, are additional reasons we are exercising discipline and are not yet long:
It’s a big world out there! Udemy, Inc. (UDMY) who?
Udemy (UDMY) is a skills-based training company which exploded higher on Friday after reporting a strong inflection in both its top-line and bottom-line late Thursday:
Considering 4.5M shares were short and there is significant longer-term resistance to work through, we plan to wait for dips to $11.25-$11.75 before buying into UDMY this week.
Assuming we can get an entry in this price zone, we would then look at selling into strength on any move to $13.25-$13.75:
Akamai Technologies, Inc. (AKAM) reports this week.
We plan to buy any breakout to new highs. We love this Cup-n-Handle within its 5-year monthly chart. $124.91 is AKAM’s all-time high price:
Spotify Technology SA (SPOT) is one of dozens of names we are monitoring closely as they carve out constructive right-side bases. $173.45 is the upside trigger. We would prefer another week of backing and filling before this price point is triggered, however, as additional basing would make a move mid/later this month more likely to succeed:
Is the US Dollar a short here?
We think so, especially if it were to fill Friday’s gap down and rally back to its 10-day EMA/20-day SMA. At such a point, we would use recent 52-week highs as our stop.
This is a trade out of legendary trader, Victor Sperandeo’s playbook.
Vic would put on longs/shorts at important price turns where odds heavily favored a meaningful turn in the intermediate/long-term trend. Like the dollar here, which just failed just below long-term resistance:
If the top in rates and the dollar are in, gold-mining stocks should inflect shortly.
We are attracted by the positive energy being flashed in Alamos Gold (AGI). Its relative strength is ready to break out too. For the next week, the two buy zones for us are dips to $12.75-$13 and a close above $13.75:
Within biotech, new leadership quickly emerged late in the week.
Take Critenics Pharma, Inc. (CRNX). It finally cleared its $30.59 secondary offering price, with a weekly close at $30.7:
We will buy any flush early in the week to the low $30s.
Thereafter, we plan to top off through Friday’s high. Our short-term PT zone is $33.50-$34.50.
Autolus Therapeutics PLC (AUTL) broke out Friday on a 5x increase in its ADV. After rising nearly 85% in two weeks, patience and discipline are paramount. My team and I plan to stack bids this week each day, from $3.80, down to what is now big long-term support in the $3.40-$3.60 price zone:
AUTL looks poised to extend to $4.65-$5.00 by early December, our target PT zone on this potential long.
A key question which needs to be resolved positively for this rally to continue through year-end is this: can the Russell 2000 get back above its strongly declining 50-Day SMA and then also reclaim BOTH its 150-day and 200-day SMAs, thereafter? What do you think?
As we wait for the Russell to resolve itself, we do what our Inflection Point methodology dictates – work vigorously on new inflection points which just manifested the prior week and that we are not yet up to speed on, or, for that matter, long.
In this regard, hat tip to Brett M re: Cooper-Standard Holdings Inc. (CPS), who correctly gave us the heads-up on this name after the company reported one of THE best earnings beats this earnings season:
Volume inflected nearly 4x. $17.25-$17.85 is our buy zone next week.
Rocky Brands, Inc. (RCKY) also had a big inflection last week:
Would have been a good one to size. Will start tracking closely for an entry in the coming weeks on dips:
One last one.
MoneyLion Inc. (ML) provides a digital banking platform for consumers. The company could be on the cusp of a meaningful inflection.
Former Citadel guys are using AI to scale new customer wins and EBITDA profitability. ML could be a huge stock the next 12-24 months if we see big upside, relative to current consensus:
Will the company deliver on earnings with the economy slowing? I think new customer wins increase the odds they do. Chart certainly looks optimal:
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Disclosure: We are long (or will be long) AGI, AKAM, ANET, AUTL, AXON, BGC, CPS, CRDO, CRNX, DECK, DELL, GDDY, MU, PINS, PLTR, SPOT in the accounts we oversee.
Disclaimer: In no shape or manner should the views expressed in this piece be considered investment advice. We reserve the right to change our positioning in these names at a moment’s notice without updating you on any such change in opinion and positioning.
Investors need to consider their investment risk tolerance before investing in the stock market and also before investing in any of the stocks mentioned in this report.
