3 Stocks on My Radar as Investors Face a Difficult Dilemma
It's been a good run, and I’m tightening up a bit and trying not to give back too many gains.
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Solid technical action continues on Monday morning, but substantial earnings, economic, and tariff news coming up could easily trigger a quick reversal. The bulls believe that the positive technical action indicates an expectation of positive news, but the bears believe that the naïvely optimistic bulls are in for an ugly surprise.
It is a difficult dilemma. On the one hand, the very positive breadth and strong momentum appear to indicate a significant shift in market character, but it has happened so quickly that there are overbought technical conditions in many places and some pullbacks and consolidations are not only likely to occur but will be healthy.
On the other hand, the bears have not backed away from the thesis that a recession is on its way. The view is that the tariff turmoil has already caused economic damage on top of the slowing economic cycle that was already in place. More than 40% of the market cap in technology stocks are reporting earnings this week, so there will be plenty of data to consider.
It has been a good run, and I’m tightening up a bit and trying not to give back too many gains. However, I’m still looking for some new entries in groups that are less likely to be impacted by tariffs. Medical, biotechnology and many non-tech and non-retail sectors are likely to be sheltered from some of the pressures.
A couple of names I’m considering Monday morning are Spire Global SPIR, which collapsed when a sale of a major division fell apart. Spire sued the buyer, and now the deal has been closed, and Spire has paid off all outstanding debt.
SPIR stock was trading in the $20s when the deal fell apart and sunk to around $7 subsequently. It has bounced back to the $11s, but it is still far below where it was. There are some changes in fundamentals, but the stock has not recovered as much as I expected.
Another name I’m looking for an entry in is Verona Pharma VRNA. It is testing its all-time highs. Cantor Fitzgerald recently started coverage with a target of $80 and stated that momentum “is just getting started" for its key drug. On Monday morning, Cowen started coverage with a buy and a $100 target.
My top small-cap biotech pick, Xeris Biopharma XERS, is acting well and has moved back over its 50-day simple moving average (SMA). I expect positive expectations to continue to improve as earnings approach.
There are good charts and some good price action, but the risk of negative headline news is very high, so be ready to move quickly.
At the time of publication, Rev Shark was long SPIR, VRNA and XERS.
