BBIO - Top 11 technical picks for the second half of 2023

2023-07-07 07:44:52 ET

BTIG technical strategist Jonanthan Krinsky is expecting a retracement for the broader market in the second half of the year following the strong gains so far.

"If the year was over right now, it would be the NDX’s ( COMP.IND ) ( QQQ ) ninth best year on record, Krinsky wrote in a note. "While upside momentum is hard to fight, we think near-term upside is quite limited in the tech/growth trade after such a significant first-half move."

"At this point, the bull case almost assuredly needs to see a breadth expansion," he said. "The S&P 500 ( SP500 ) ( NYSEARCA: SPY ) ( IVV ) ( VOO ) excluding the top-seven-weighted names remains below its August ’22 and February ’23 peak, the equal-weighted S&P 500 ( RSP ) is ~4% below its February ’23 peak, and small-caps ( RTY ) ( IWM ) are ~7% below their August ’22 peak."

"If this is truly a new bull market, it’s unlike any we have seen in the modern era through the first nine months. We suspect any material upside from here is driven by rotation into the laggards rather than a sustained divergence into the mega-caps."

"Aside from breadth, which admittedly has improved recently, the biggest issue we see with the new bull thesis comes from the credit markets," Krinsky added. "Nine months into a new bull, credit spreads ( JNK ) ( HYG ) ( LQD ) should be tightening meaningfully. While they are tighter than they were at the peak in September, they are still wider than February levels."

"Given our view for some mean reversion out of secular growth/tech into cyclical value to start the third quarter, we aren’t expecting the SPX to do much over the near term as it will have conflicting forces," Krinsky said. "Ultimately, however, after the rotation is done, we do expect a more broad-based decline, with a move back towards 4,000 (as a reasonable objective)."

"With challenging markets to remain in the second half of 2023, we have identified eleven individual stocks from the BTIG Top Picks that we feel are worth highlighting from a technical-analysis perspective, providing additional conviction on the names," Krinsky said.

Those stocks are:

1. Abbott Labs ( ABT ), fundamental rating Buy, price target $130 - "Still in a trading range, but very close to breaking to the upside with a move above $112-$114, which would open the door towards $120."
2. American Homes 4 Rent ( AMH ), Buy, $38 - "It has spent the last couple of months attempting to breakout above $36, and we think if it can achieve that it has room up towards its September 2022 highs around $39."
3. BridgeBio Pharma ( BBIO ), Buy, $32 - "Big resistance around $20, but above that there is little resistance ... (given) that and the 18 -month base, a move into the upper $20s would be reasonable."
4. Boot Barn ( BOOT ), Buy, $98 - "It’s now coming into initial resistance in the $85-90 zone, but above that there should be room towards $100."
5. DraftKings ( DKNG ), Buy, $31 - "Near-term resistance at $27, but if it can clear that it should have upside towards $30-$32."
6. Essent Group ( ESNT ), Buy, $50 - "It has recently begun to exhibit some upside momentum, breaking above a one-year base."
7. Legend Biotech ( LEGN ), Buy, $90 - "With the stock at all-time highs there is no natural resistance, but we would note the upper end of its trend channel comes in around $85-90."
8. Outlook Therapeutics ( OTLK ), Buy, $7 - "Big initial resistance is now around $2, but a breakout above that would open the door towards $2.80-3."
9. Rithm Capital ( RITM ), Buy, $13 - "Next meaningful resistance around $9.75; above that should be room towards $11."
10. Seadrill ( SDRL ), Buy, $50 - "A chart with not a lot of history, but the consolidation over the last few months is encouraging as the overall space also improves."

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