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The market has done an admirable job at recovering from last Wednesday’s sharp selloff. Stocks have now put together four straight days of gains and are close to fully recuperating the losses. You may remember that the S&P had completed two consecutive sessions above 2400 before the plunge…and it took a while for the index to reach that mark. And now it is back to within two points. So is the S&P set to breach that milestone again?
The editors aren’t sure.
“The momentum would have one believing that stocks are ready to break above 2400 once again. However, I sense it will not be that easy to fully negate all the recent concerns,” said Steve in RTA, who thinks we will consolidate below that mark for a while longer.
“2400 resistance will now have to give way if the bulls want to see a breakout. I really have no good feel here. Buying feels like chasing, and shorting seems like a terrible idea,” said Jeremy in Counterstrike.
We’ll find out soon enough since the S&P closed Tuesday’s session just 1.58 points away from 2400 and less than 0.10% away from getting back all of last Wednesday’s losses. The index was up 0.18% today to 2398.4, while the Dow increased 0.21% to 20,937.9 and the NASDAQ inched higher 0.08% to 6138.7.
Today's Portfolio Highlights:
Zacks Counterstrike: For the second straight day, the portfolio has a nice, double-digit return (+50% for AAOI yesterday). Financial and marketing services provider Square (NYSE:SQ) has been climbing ever since reporting a 55% positive surprise. But now the stock is approaching secondary price targets, so Jeremy felt this position served its purpose. The editor sold it on Tuesday and secured a solid 25.8% return in about two months.
Momentum Trader: Shares of CAI International (CAI) are moving higher after pulling back to its 50-day moving average...and Dave wants in. He added this transportation finance and logistics company to the portfolio on Tuesday with a 12.5% allocation. The editor hopes that CAI will break through the top end of its trend channel. Meanwhile, Dave used the rest of the portfolio’s cash to buy more shares of staffing company Kelly Services (KELYA), which was first bought last Wednesday amid a breakout. The complete commentary has more on these moves, along with a detailed look at CAI’s chart.
Options Trader: The portfolio had three new signals on Tuesday:
• Kevin is still bullish on Wabco (WBC), but the portfolio’s two June calls in the stock only have 17 trading days left. That’s too close for comfort, so the editor removed those calls and added three September bull call spreads.
• Dover (DOV) is part of a space (Machinery – General Industrial) that’s in the top 12% of the Zacks Industry Rank, and it has just broken out of a bullish rectangle consolidation pattern. Kevin thinks more new highs are on the way, so he added a few bull call spreads in the name.
• Total System Services (NYSE:TSS) is projecting an EPS growth rate of 16.86% and a sales growth rate of 31.01%, which are both MUCH higher than the industry median. Yet the valuation for this global commerce solutions company is well below the median, which makes TSS a “fantastic growth and valuation pick”. Having just broken out of a bullish ascending triangle pattern with more upside to come, Kevin decided to add a couple calls in TSS.
Make sure to read the full write-up for specifics on each of these moves.
TAZR Trader: The market is overreacting to what amounts to nothing more than an ongoing senior management reorganization at Alexion Pharmaceuticals (NASDAQ:ALXN). Shares of this profitable biotech dropped by more than 8% on Tuesday, providing Kevin with a great opportunity to pick up more shares of a company that’s on its way to $4 billion in sales with a growing pipeline and a P/E below 25X. The editor thinks that ALXN will be back to $110 soon and then resume its course to around $150. He added more shares on Tuesday to the original 7% allocation from two weeks ago. Read the full write-up for more.
Stocks Under $10: In fiscal 2016, Quantum Corp (QTM) got 29% of its revenues from storage and 63% from data protection. So this stock is way more than just storage; it is also a play on cyber security. Despite having a foot in two important areas and generating $505 million in revenues last year, Brian Bolan feels this approximately $8 is still under the radar. So he added it to the portfolio on Tuesday. The full commentary has a lot more on this new addition, including a review of its earnings history, estimate revisions and valuation.
Zacks Short List: Half of the portfolio was replaced in this week’s adjustment. The stocks that were short-covered include:
• Zillow Group (Z, +4%)
• IAC/InterActiveCorp (IAC)
• Occidental Petroleum (NYSE:OXY)
• Apache Corp (NYSE:APA) and
• Agnico Eagle Mines (AEM)
The new buys that replaced these names are:
• Atheanahealth Inc. (ATHN)
• Bitauto Holding Ltd. (BITA)
• Charter Communications (NASDAQ:CHTR)
• Continental Resources (CLR)
• National Oilwell Varco (NYSE:NOV)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
All the Best,
Jim Giaquinto
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