Stocks Feel The Pressure And Plunge

The market had been holding up well this week among a number of potential problems, but it all seemed to catch up with the major indices today. Technology took a header in the session on a disappointing Cisco report, while Wal-Mart also dipped because as Surprise Trader put it: “some were expecting a blowout quarter instead of a good quarter”. 

For investors looking to take some profits amid violent protests, North Korea and a new terrorist attack in Spain; these earnings reports were enough to give the market one of its worst days in months. The NASDAQ plunged 1.94% to 6221.9, while the S&P was off 1.54% to 2430. Once again, the Dow had the best performance of the three…but today that meant a 1.24% plunge that ended its four-day winning streak and brought it well under 22K at 21,750.7. 

In the portfolios, Large-Cap Trader made five moves, including selling a double-digit winner and buying three new names. Options Trader cashed in a triple digit profit, while Dave Bartosiak bought in Home Run Investor and Momentum Trader each. Learn about all these moves in the highlights section below, along with an insurance policy that really paid off on Thursday. 

Today's Portfolio Highlights: 

Large-Cap Trader: John has been teasing some moves in the portfolio all week, and today he made good with five trades in all. Firstly, he freed up 13.5% of portfolio weight with a couple of sells, including a 16.8% gain for Texas Instruments (TXN). Then he added the following three names with a 4.5% overall portfolio weight: 

• Lam Research (LRCX)
• Micron Technology (MU)
• TE Connectivity (TEL) 

You’ll note that all three of these are tech stocks, which the editor believes will continue to be hot for the foreseeable future. They are all either a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) with impressive Zacks Industry Ranks (LRCX and TEL are in the top 1%). These stocks also have Zacks VGM Scores of B and attractive valuations. Make sure to read the complete commentary for more specifics. 

Options Trader: The bull call spreads in Wabco (WBC) have already made 98% of their max value at expiration, so Kevin decided to sell the spreads even though there’s still plenty of time. Basically, there’s no need to risk 98% for an extra 2%. Plus, additional upside is very limited now. The editor sold to close the 3 Sept 120 Calls AND bought to close the 3 Sept 125 Calls. The spreads brought a profit of 108%. Kevin expects this stock to move another 20%+ here to about $168, so don’t be surprised when he gets into a new position in WBC with more upside potential. The full write-up has more.

Home Run Investor: It’s time for a little “housekeeping” in the portfolio, so Dave sold a couple of names and then picked up AppFolio (APPF). The company offers cloud-based software solutions for property management and legal industries. Revenue growth is expected at 32% for this year, which translates to EPS growth of 158%! As for next year, revenue and EPS are expected to advance an additional 26.6% and 59%, respectively. The complete commentary has a lot more on this new addition, and be ready for even more housekeeping in the days to come. 

Momentum Trader: This portfolio has a “Lead, follow, or get out of the way” philosophy, and today Dave sold a company that had trouble with the first two options. KLXI was “dead money”, so the editor just pushed it out of the way. He thinks that Biotelemetry (BEAT) will have a better opportunity to lead. The company provides ambulatory outpatient management solutions that monitor clinical information of a person’s health. This move is a play on the breakout to new highs, and is also a part of the portfolio’s ongoing diversification effort. The write-up has a lot more on this new addition, including a breakdown of its chart. 

TAZR Trader: Do you want to know why Kevin bought IPath S&P 500 VIX Short-Term Futures ETN (VXX) earlier this month? For days like this! The editor had a feeling that volatility was going to rise this month, and that has certainly been the case given political problems at home, terrorist attacks abroad and normal concerns over some key earnings reports. As a result, this cheap insurance policy was the best performing position among all the portfolios today with a 16.3% advance. No other stock was in double digits in this rough session. 

All the Best,
Jim Giaquinto

 

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