By Kevin Marder
NARINDER NANU/AFP/Getty Images
Shares continue to give a good account of themselves. Volume has dropped off due to the many vacationing investors.
The key distinction that separates this intermediate-term advance from those that immediately preceded it is the stand-up action of speculative growth stocks. This is your risk-on mindset talking. In particular, a number of recent new issues have recorded blistering breakouts, including Acacia Communications , Twilio /zigman2/quotes/205796518/composite TWLO -4.68% , Weibo /zigman2/quotes/206830028/composite WB -3.41% and Yirendai /zigman2/quotes/201030587/composite YRD -1.06% .
Issues with a little more seasoning that have asserted themselves as leaders include Gigamon , Lumentum Holdings /zigman2/quotes/204419752/composite LITE -1.51% , Nevro /zigman2/quotes/209913092/composite NVRO -1.15% , Penumbra /zigman2/quotes/203831055/composite PEN -2.16% , Sina and Veeva Systems /zigman2/quotes/202850210/composite VEEV -0.16% ,
Every bull market needs a certain amount of speculative sentiment, or risk-taking. Seeing growth stocks like the above prance all over the tape goes a long way toward solidifying the health of this market. Of course, too much of a good thing can be disastrous, as is seen late in most bull markets.
The above go-go names may be in vogue now, but experienced speculators recognize that these same issues are the ones most likely to fall the hardest when this bull is done.
Among the names, Minerva Neurosciences /zigman2/quotes/201988204/composite NERV +0.07% is a younger biotech concern that came public a little over two years ago at $6. Shares of the developer of central nervous system disorders peaked recently at $15.84.
While this is a development-stage outfit with no revenue or earnings, very aggressive speculators may note the constructive technical formation of a cup. This pattern follows the 359% jump in a five-day period during May-June.
Price will more than likely pull back to form a handle to go with its cup. Speculators who don't mind trading off the chart alone, with no fundamentals to lean on, should watch for this pullback as a means of obtaining a toehold in the stock.
As always, a protective stop should be used to mitigate risk, along with a starter position that is half normal size, or less. This initial position could be added to if the stock proves itself.
This is clearly a very speculative issue, all the more so due to its being teen-priced and its having a $465 million market capitalization and $6.8 million average daily dollar volume ($25 million and up in ADDV is preferred here).
However, big winners in bull markets that favor growth shares often come from so-called new merchandise names like this.
Healthequity /zigman2/quotes/210521638/composite HQY +1.96% is a classic growth stock. The Utah-based company provides online platforms for helping consumers oversee their tax-advantaged healthcare savings. Most Wall Street analysts forecast 41% earnings growth in the January 2017 fiscal year, followed by another 31% in the 2018 fiscal year.
Revenue growth has been stellar. Rates of 46%, 40%, 44%, and 47% have been posted in the last four quarters, respectively.