Watching These 6 Names Closely as Small-Cap Earnings Near

Following the very robust market recovery on Monday, investors are taking some gains and repositioning on Tuesday. The ISM Services report was a bit softer than expected, which confirms some fears of economic slowing, but the main issue for the market is technical conditions. Despite the dip on Friday, many stocks are still overbought and valuations are stretched, especially for big-cap technology names.

Both the Magnificent Seven MAGS and the Russell 2000 IWM are down a little on Tuesday, but they are exhibiting relative strength versus the S&P 500. Breadth is solidly negative, with around 3,500 gainers to 6,250 decliners, and there are only around 250 new 12-month highs after the pullback last week.

There is still a good amount of speculative action. My scan of stocks moving up more than 10% is quite lengthy. This is partially due to the fact that small-cap earnings reports will hit a peak this week and next. Dozens of stocks on my radar will report earnings in the next few days. A few that I am watching closely are Uber UBER, Bridge Bio BBIO, Delcath Systems DCTH, ADMA Biologics ADMA, Sensus SRTS and Emergent BioSolutions (EBS).

On Monday, I discussed a low-price drone play, Ondas Holdings ONDS. The stock broke out nicely and is testing a hurdle at the $3 level. I took some partial profits and will add back more aggressively on pullbacks. The chart looks quite healthy in the longer term, but I am adjusting my position size as it develops.I’m not unhappy to see some weakness, as I don’t want to chase strength at this juncture. I much prefer to buy on pullbacks and dips at this juncture. I believe we will have increasingly choppy action as earnings season comes to an end and we head into seasonal weakness in August through October.

At the time of publication, DePorre was long ONDS, UBER, BBIO, DCTH, ADMA, SRTS and EBS.