Something For The “Shopping” List:
There is no question many software names have been obliterated in the last couple months, and to watch the action from some of the former generals is enlightening. We mentioned yesterday the act of buying blindly during huge falls is hazardous to your portfolio. One needs some kind of edge when purchasing and we like to see bottoming candles, although they obviously do not work all the time (case in point yesterday we were WRONG with OKTA). More often than not they are valuable when guiding entries. Below is the chart of SHOP, and it shows a bullish engulfing candle this Wednesday, which gives you a clear stop (below the low of the intraday low on a CLOSING basis). Again however there is no reason to be a hero in this market climate. Play small or stay in cash. It’s akin to an old salty horse player I used to absorb information like a sponge from. He used to say “do not play every race.” Be selective and do not worry if you miss the first few percent. There will be plenty to make, once the real trend asserts itself.
The former 800lb gorilla CSCO, has become more than a networking giant over the years, but back in the day there was fierce competition between it and JNPR. Lately they have lagged overall technology strength as they are 16 and 19% from their most recent 52 week highs (NTGR sits 21% off most recent yearly peak, but did rise 4.5% this week). Below is the chart of CSCO, and how it appeared in our 9/17 Technology Report. A doji candle on 7/15 warned of a potential demise, and it dropped rather precipitously from there. The round numbers have played a role here with a gap fill to the upside at the 50 figure this month, and on the WEEKLY chart there could be room to the downside, where support was found in April and December ’18.
The recent lack of strong breakouts from leading groups, could be a cause for concern. A healthy market will witness several of them from top performing sectors. We also like to stress often not to enter suggested pivots without PRICE confirmation on a CLOSING basis. A good case of this could be the chart of MU below, and how it appeared in our 9/20 Technology Note. Of course it reported earnings last night, and it was not well received. Prior to todays reaction it recorded moves higher by 13.3 and 9.6% on 6/26 and 3/21. Those that tried to get in ahead of the set up are learning quickly that confirmed breakouts have a better success rate. Be very patient in this environment. Cash is a position.