A Familiar Foe Awakens

Hey everybody,

Dave Bartosiak here filling in for Jim “The Count” Giaquinto and yes, everyone is getting a nickname today. Jim will be back with you tomorrow. Hopefully he’ll bring the bulls back along with him. A frustrating, choppy session on Wall Street today with erratic action throughout. I familiar foe has returned to infiltrate the headlines. Relieved to finally get some distance from Coronavirus headlines, the market has unfortunately turned its collective nervousness towards China.

Threats of punitive US economic actions has put the two superpowers at odds yet again. Snippets back-and-forth from economic advisors have made for some nervous stomachs. With the S&P 500 inching within a stone’s throw of the 200-day moving average, investors have become unsure of what’s coming next. A breakout from that important technical level would put our collective sights back on all-time highs.

For now, it remains illusive, lingering just overhead. The S&P 500 finished the day down 23.1 points or 78 bps at 2,948.50. The NASDAQ Composite fared worse, losing 90.90 points or 97 bps at 9,284.88. The big boys of the Dow Jones Industrial Average shed just 101.8 points or 41 bps at 24,474.1. The Russell 2000 small cap index managed to inch itself into positive territory by a slim margin, adding a fraction of a point at 1,347.55.

Chart of the Day

Pre-Holiday Effect

I stole this from the folks at Stockcharts.com. It’s a table showing average pre-holiday results over the last 50 years. Coming up this Monday, the market is closed for Memorial Day. According to the chart, buying two days before Memorial Day and selling at year end would have yielded returns of -4.7%. But, waiting just one day before to buy and selling at the end of the year would have given investors 22.8%. That’s quite a difference. This implies that two days before Memorial Day, today, is not a great day to buy. The day before, tomorrow, shapes up to be much better. I’m shocked by how dramatic the difference actually is.

Today’s Portfolio Highlights:

Surprise Trader: I don’t normally toot my own horn but…toot toot. I ripped half of Covetrus today for nearly 40%. That comes just one week after adding the stock to the portfolio. A solid earnings report is the reason for the nice move higher. I also added Viasat, a telecom satellite company set to report earnings after the bell next Tuesday.

Marijuana Innovators: The allure of Aurora Cannabis was too much to resist. The man known as “West Coast Dave” Borun shrewdly came in to scoop up ACB after a solid earnings report.

“One of the most important factors for a stock gaining momentum is a few consecutive positive events.

We’ve certainly seen that in Aurora Cannabis. The first was a surprise quarterly report last week. The headline was an 18% increase in revenues, but the real highlights were hidden deeper in the report. The first was that a significant portion of the increase came from so-called “value-priced” products. For the average recreational customer, that means “cheap weed.” Medical sales were up 13.5%.”

Stocks Under $10: The “Bolanator” Brian Bolan was at it again today, cutting Avid Technology and adding Akoustics Technology. AKTS is a Zacks Rank #2 (Buy) breaking out from the $8 level. It’s been on a roll recently, beating our Zacks Consensus Estimates for two quarters in a row.

Healthcare Innovators: Kevin “Cooker” Cook made a bold new buy, scooping up Moderna. This is the company which recently released initial data on COVID-19 vaccine trials on Monday that sent the stock surging up to $87. Cooker waited in the weeds and has now pounced on the stock beneath $67. Checkout his write-up for the extensive, detailed analysis of his expertly timed move.

Counterstrike: Jeremy “FNG” Mullin was a busy beaver today. First, a couple of hits from Counterstrike including the addition of NICE. The Israeli-based company provides software solutions, aiming to help businesses increase efficiency, prevent financial crime and ensure compliance. He called it a “starter position” and one he’d gladly add to on a pullback.

Commodity Innovators: FNG was at it again, this time on the short side of the equation. Oil has had a nice run, coming off those nasty lows in negative territory to the mid-$30s. He added SCO, the short oil ETP, while looking for a 10 to 20% move lower. There have been some rumblings about oil for June delivery going negative also. If it does, this is going to turn out to be a fantastic idea.

Conclusion

A choppy day on Wall Street with the 200-day moving average just overhead for the S&P 500. That sets us up for a test of that important level in the short-term. I would not be surprised to see a nice pre-holiday rally that tests that level tomorrow. I believe in America.

Have a great night,

Dave

Recommendations from Zacks' Private Portfolios:

Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>


Zacks Investment Research