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Dow Hits Another Record, NASDAQ Hits a Wall

It appeared that the NASDAQ was well on its way to an amazing 14th gain in 15 days on Thursday...and then the bottom dropped out. All of a sudden, the index plunged by approximately 1.5% at its lowest point. It was able to make up a good amount of that loss by the closing bell, but was still off by 0.63% today to 6382.2. 

The editors aren’t alarmed. Steve suggested that it could be “nothing more than a temporary case of altitude sickness” in RTA. And as you’ll see in the highlights section below, Dave said in Momentum Trader that this drop provides one of the better buying opportunities in a while. 

The other two major indices dipped along with the NASDAQ, but the concern was with technology stocks. Therefore, though slipping momentarily into negative territory, the Dow recovered nicely to advance 0.39% for another new high of 21796.6. The S&P also had a nice rebound but still declined 0.10% to 2475.4. Tomorrow could be a big day for the market as Q2 GDP is released in the morning. Also, it looks like Amazon’s numbers after the bell today were disappointing, so that could have an impact as well.

It was a busy day in the portfolios with several editors taking some big profits off the table. Look at all the moves in the highlights section below: 

Today's Portfolio Highlights: 

Zacks Counterstrike: In early May, Craft Brew Alliance (BREW) announced a positive surprise of 50%, and now its getting prepared to report again next week. It’s been a winner for the portfolio, though it has recently slipped to a Zacks Rank #3 (Hold). Jeremy decided that this was a good time to sell half of the position and take a 13.5% profit. He’ll watch to see what the other half does from here. 

In other moves, shares of Wynn Resorts (WYNN) have slipped to the $130 level despite beating on both the top and bottom lines in its latest report. This has “Zacks Counterstrike” written all over it, especially since it has now dropped into Jeremy’s beloved Fibonacci long scenario. The editor thinks this best-in-breed casino is worth more than $145, so he bought it today with a 7% allocation. WYNN has already been a winner for the portfolio when it was sold for 12.7% back in June. Furthermore, Jeremy also doubled down on his Thor Industries (THO) position with an extra 5% allocation. Read the complete write up for more. 

Reitmeister Trading Alert: Sometimes you just get lucky. There’s no way to sugar coat the recent earnings report from Penn Gaming (PENN); it was a bad showing with a big miss and a lowered guidance. Steve expected the stock to plunge by 10% or maybe even 20%. But the stock only dropped by about 2%. The editor’s first instinct was to only sell half, but the surprising response convinced him to sell the whole thing and take a more than 11% profit. Phew! Steve also decided to sell some of Aaron’s (AAN) ahead of its earnings report for a 9.6% return. He’s holding onto a 6.1% allocation in case the company continues to impress with its turnaround efforts.

Options Trader: The portfolio had a trio of moves on Thursday. Here they are:

• Landstar (LSTR) is getting pounded today despite a positive beat last night. Kevin believes the move is way overdone, but he sees an opportunity now that the plunge has decimated the short side of yesterday’s bull call spread. He decided to leg out of the spread by buying to close the Oct. 95.00 Call and taking an 82% profit. The editor still likes LSTR and has no problem keeping the long call for the eventual move back up. 

• CDW (CDW): Kevin still likes this stock, but it has a negative Earnings ESP heading into next week’s report on Thursday (8/3). So he decided to remove the bull call spreads by selling to close the two Sept 60.00 Calls AND buying to close the two Sept 65.00 Calls. The spreads brought a gain of 38%. 

• AbbVie (ABBV): This is a volatile stock that reports earnings tomorrow. If they miss, then the Nov 70.00 Call would get crushed. However, a smaller risk profile would limit the loss, but still make money if it beats. Therefore, the editor sold to close the Nov call for a 21% gain and then bought to open an Aug. 72.50 Call. 

Learn a lot more about these moves in the complete commentary. 

Large-Cap Trader: "Yes, that was profit-taking today. I think this rally is not over, as the second quarter keeps showing us more beats than any quarter we have seen in some time.  

"However, as our portfolio shows this week, underlying the broad move upwards in major indexes is lots and lots of sloppy share price action.

"I can’t help but see the algos shorting and thrashing their way across the earnings landscape, manipulating what news they can to their advantage.

"Once the battlefield clears, and the troops look for their flag, the news that we are headed to record earnings, on top of record stock prices, will be seen more broadly.

"In other words, don’t pay too much attention to any given stock right now. Pay attention to overall earnings and overall price action." -- John Blank 

Momentum Trader: "Seemingly out of nowhere the market got an upset stomach this afternoon and turned things upside down. The NASDAQ led the way down and several names lost their footing. No real cause for alarm as there wasn’t really much fundamental justification for the selling. I think this afternoon gave the market a great buying opportunity.  

"It’s extraordinary to me that the NASDAQ finished the day off just 63 bps, cutting the losses in half. I see Amazon’s profits were off a bit and that’s certainly not going to help us overnight. However, I will be out there looking for stocks to add tomorrow morning. I’m hoping we gap lower so I find some deals.

"A little black eye for tech today shouldn’t scare off investors. Rather, we should be looking at this as an opportunity to add more exposure. The large caps didn’t seem to be bothered by the action so neither should you. Get your shopping list together and get to work." -- Dave Bartosiak

All the Best,
Jim Giaquinto

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