Seeking Alpha

Goldman Closes Above 210; Breakout Confirmed - Square And Others In Breakout Bonanza

by: David H. Lerner

I am favoring breakouts that are catch-up trades.

Financials have a good fundamental reason to gain value. The 10-year should bend the yield curve in the right direction.

In a market that is too good to be true, you need to be wary and keep your greed in check.

Illumina is on sale. It has a beautiful future. Just be patient and build a position slowly over the coming week.

These breakouts are catch-up trades, too

Traders are scouring the landscape looking for names that are primed for acceleration to the upside. There are two types of breakouts; one is breaking out to all-time highs, which can be very explosive, and then there are catch-up trades. These are names that have been languishing under a previous high for a time. While there are overhead stranded buyers, enough time has gone by to shake out enough sellers that the names below have a lot of room to run.


Financials can be an interesting trade here. The 10-year should recover as the yield cures actually go back to concavity. Paradoxically, with a rate cut at the shorter end of the curve, the longer end is now going back towards 2.3%, perhaps 2.5%. That differential will help the financial sector make more money. As previously noted, the charts showed that Goldman Sachs (NYSE:GS) should accelerate to the upside if it were to close above 210, and it has. The yearly high for GS is 245. I could see GS getting close to that level fairly quickly. I suspect that many of the large-cap financials are going to run; GS is just the one with the most "catch-up". If you don't like GS, I think the other big financials should do well. The JPMorgan (NYSE:JPM) chart looks pretty good, too. GS is moving according to plan, so that gives me more confidence about generating good alpha.

The catch-ups

Square (NYSE:SQ) had a "cup and handle" formation and broke above the 150 DMA. Currently at $79 with a 101 52-week high.

Nvidia (NASDAQ:NVDA) has a very similar formation. It broke a descending triangle, with a "cup and handle," and broke the 150 DMA with a 292 52-week high.

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL): I have analyzed and charted Alphabet over the last few weeks. Its rally is moving along just fine. It's not too late to get it.

Booking Holdings (NASDAQ:BKNG) broken out of a pennant formation and broke above the 200 DMA. BKNG's 52-week high 2,131. It closed just under resistance of 1,875 at 1873. If it closes above 1,879, that should confirm an acceleration to further highs on the way to 2,131. Given that Delta (NYSE:DAL) totally rocked its numbers yesterday, the travel sites like BKNG should rock and roll as well.

Snap (NYSE:SNAP) has broken out solidly, and its all-time high is 100% higher. The excitement is that it is being run like a real company, and it is growing revenue. The momentum is evident. I don't need to look at a chart and neither do you. There is still some alpha left in this name.

UnitedHealth Group (NYSE:UNH) along with Anthem (NYSE:ANTM) and Centene (NYSE:CNC) were names I got behind in May, and the government is easing off nixing the rebate economy for drugs. ANTM is about to go to all-time highs, and UNH still has some catch up, so I favor the latter, not the former. Centene is trading at 53; the 52-week high is 74.5. CNC is acquiring the WellCare Group, which should close in the first half of 2020. I think there are still some points to be scalped here.

Head on a swivel

Why am I concentrating on catch-up trades; there is any number of stocks that are breaking out to fresh highs? Frankly, I feel more secure with them right now. Summer rallies are great, and they can really run since a lot of the experienced players are in their summer homes getting their drink on. In a low volume environment with inexperienced traders, we can get pretty toppy. Hot names that are going to all-time highs might just get punished all that much more when the long pants go back on.

If you are a really fast money trader, go ahead and have at the names that have blue skies overhead with nothing to stop them. Just be ready to pull the trigger before the party is over. What's going to poop the party? I have absolutely no idea. Experience has taught me to be very wary of times like these. Everyone knows "Don't fight the Fed," so I am not fighting it, but man my head is on a swivel, and if you are trading, yours should be too.

Illumina (NASDAQ:ILMN) is going on sale

ILMN is down huge today. It warned that revenue will take a hit. I suspect that Thermo Fisher Scientific (NYSE:TMO) and Danaher (NYSE:DHR) will go down in sympathy. Look, Illumina is the best DNA testing equipment company globally. If you believe that DNA testing is going out of style, then this name is not for you. Illumina Chief Executive Officer Francis deSouza said in a statement: "Our preliminary analysis suggests that these challenges are transitory and do not reflect a macro change to the fundamentals of our business."

Illumina is still in an emerging field. We still have an explosive opportunity with precision medicine, drugs that are focused on someone's specific genome. I am not advocating buying it down nearly 70 points in 24 hours. Actually, if you have the ability to take a long-term view on a volatile stock, maybe even start a 1/10th position today and look to build a position. If you have space in your long-term investment account for such an investment, perhaps a trust fund for the grandkids or your young children, this might be a great investment. The 52-week low is another 30 points lower, and who knows in this low volume environment how much of a sale we are going to get, but it may be a few days before ILMN really bottoms. It may also take a long time to get its momentum back, but man this is an exciting opportunity to build a position on a name with a future. Just take little bites and be patient! Go long; just don't go all in, and probably wait a day or two.

Insider corner

CalAmp (NASDAQ:CAMP) Director pays more than $500K in shares.

My Take: This used to be the old California amplifier and electronics components manufacturer. Now it is an IoT telematics software and hardware integrator and cloud services and SaaS provider. I find this very intriguing; that merits further study. It seems like it is in the same world as Orbcomm (NASDAQ:ORBC) and Iridium (NASDAQ:IRDM), two companies that I already like.

Thor Industries (NYSE:THO) Director buys more than $200k in shares.

My take: Mobile home/RV industry should do very well in this low interest, strong consumer world. I heard some good mentions about this name, so putting this together with that. If we have more confirming data and insider buying, it might get interesting.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.