The nature of stock market momentum is that it tends to last longer and go further than seems reasonable. Market players that try to employ common sense to the market often finds themselves on the wrong side of the action as a trend persists much longer than seems logical.
We have an extension of the recent trend again today. There isn't any particular news to account for the strength but often we have this sort of positive momentum as we head into a long weekend. Market players are in a good mood and no one wants to miss out on the party that is taking place.
Breadth is running about even so far and new highs are down to around 250 but the pockets of momentum in the pot sector and the FAANG names is keeping things running. If this market isn't going to correct then there isn't much choice but to find some things to buy instead.
I've flipped my pot plays into strength and am back on the sidelines in that group. I'll be waiting for them to develop again but they are feeling a bit frothy at this point.
There are a number of biotechnology names on my watch list. At the top of the list is Sarepta (SRPT) which I've mentioned many times. The company is expected to announce the lifting of a clinic hold that was due to a manufacturing issue and it looks like buyers are anticipating that news to occur soon. Another stock I'm watching as we head into biotechnology conference season is Sangamo Therapeutics (SGMO) . It has been basing recently and should attract interest through $16.25 or so.
In the technology space Hewlett Packard Enterprise (HPE) is filling a gap on the chart from last May following a strong report last night. The company posted earnings of $0.44 which was seven cents ahead of estimates. Revenue was up 3.5% and ahead of estimates.
The story with HPE is that they are surpassing expectations and raising guidance incrementally. The stock has had 100% EPS growth the last two quarters and will be up 55% for the FYE October 2018. Current estimates for the next fiscal year are for much more tepid growth but the market obviously is expecting more upward revisions.
Technically, the move today takes the stock back to a key resistance level around $17.50. It may need to rest a bit before it can take out that level but it has good support now and the renewed momentum will attract interest. The stock trades with a trailing PE of just 12 and if estimates continue to come up there will be institutional interest in the stock.