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Nothing Wrong With a Little Volatility

SPECIAL NOTE: The Reitmeister Trading Alert officially closed today, and will be replaced by a weekly service called The Reitmeister Report on September 6. Steve has a few suggestions on what subscribers should do from here with the RTA portfolio. Learn more at the end of this commentary. 


Well, we knew this was going to happen. If the U.S. and North Korea are going to be threatening each other, then the market will most definitely react sooner or later. It held up really well yesterday, but that wasn’t the case today. 

The S&P slumped 1.45% to 2438.2, while the Dow slipped back below 22K with a 0.93% purge to 21844. However, the NASDAQ got the worst of it with a 2.13% plunge to 6216.9. It was the third straight day of declines for the indices. 

“It's been several months since we saw an overall stock market sell off like we had today. That's probably why it felt more painful this time around,” said Tracey in Insider Trader. “Sell offs are normal. They are healthy. They don't mean the bull is dead.” 

It does mean, though, that volatility is back...which is welcomed news for some of the editors who have been yawning their way through the market. The portfolios were very active on Thursday (see below), and will likely remain so as long as uncertainty and fear continue to build in the market. 

"Frankly, volatility is healthy for markets. In the short-term it hurts for sure but you’ve got to expect things like this during bull market runs," said Dave in Momentum Trader

Today's Portfolio Highlights:  

Value Investor: It was time to get out of Hawaiian Holdings (HA), as shares of the airline hit the portfolio’s “sell” price target. Tracey still likes the airlines, but they’ve been really soft for the past several weeks. She decided this was a good time to sell HA for a nice profit of 33% and then go looking for another opportunity. 

That new opportunity came from Williams-Sonoma (WSM), which will give the portfolio some much-needed exposure to the consumer. The company is one of the best names in the furniture space, but it’s trading near multi-year lows right now. However, it has solid value fundamentals and is considered to be undervalued right now. Tracey really likes getting this name so cheap and will be watching its earnings report closely later this month for signs of a catalyst. Get more specifics on this new buy in the full write-up. 

TAZR Trader: The plan for ProShares Ultra VIX Short-Term Futures ETF (UVXY) when it was bought yesterday was to sell into the next volatility spike. Well, it took less than 24 hours to see it as North Korea concerns pressure the market. True to form, Kevin sold UVXY on Thursday for a nice 22% return...in just one day! It looks like the editor picked the perfect time to start buying volatility. In other news, IPath S&P 500 VIX Short-Term Futures ETN (VXX), the portfolio’s other insurance policy that was bought on Tuesday, was the best performer among all the services today with an advance of 13.6%. 

Options Trader: Kevin has a feeling that Citigroup (C) could show some sideways to backfilling action over the near term. The editor still likes the company, but not enough to risk his profit waiting for it to rebound. He would rather just take the money now and get back in later. So he closed out the bull call spreads in C on Thursday for a 30% return. 

Meanwhile, retail names have been struggling recently…but not Steve Madden (SHOO). The footwear company has been bucking the lousy trend in its space. Kevin thinks it’s a standout performer that should get up to $54. Plus, it’s a Zacks Rank #2 (Buy) with a Zacks VGM Score of B. The editor sees significant upside potential in SHOO, so he’s starting off with a couple relatively cheap options by buying to open two Dec. 45.00 Calls. The full commentary has more specifics on today’s moves. 

Zacks Counterstrike: Jeremy loves to short the big guys. First it was Amazon, and today it’s the investment banking giant Goldman Sachs (GS). Since its disappointing earnings report last month, the stock has drifted right into a Fibonacci short, which is one of the editor’s favorite technical setups on the down side. If equities continue to sell off, then GS is poised for a pullback. And it doesn’t help that earnings estimates for the bank have been falling of late. Therefore, the portfolio short sold GS on Thursday with a 12% allocation. Make sure to read the complete commentary for more. 

Momentum Trader: Dave is seeing opportunities everywhere in this pullback. One deal that’s “jumping off the page” is Chegg (CHGG), an online education platform that’s enjoying the back-to-school season right now. The editor believes this momentum can continue and appreciates that its part of an “off-the-radar” industry that is insulated from market risks. Therefore, he dumped the slumping DWCH and picked up a 12.5% allocation in CHGG. Learn more about this new pick in the complete commentary. 

Healthcare Innovators: Despite a soft quarter and guidance, Kevin has let it be known that he likes Jazz Pharmaceuticals (JAZZ) and will pick it up at the right price. This specialty pharma company is focused on neurology and psychiatry, and shares are holding up very well on an otherwise rough session. The editor decided this was a good time to buy. Meanwhile, Sangamo Therapeutics (SGMO) beat the Zacks Consensus Estimate in its quarterly report last night, sending shares sharply higher by 12.4% today. That gives HI one of the top-performing stock of all the portfolios on Thursday.  

ETF Investor: "But speaking of Korea, the concerns there have really roiled the market as of late, and especially in Thursday trading. Stocks were sharply lower on the day, while the VIX gained close to 40% on the session. All this is despite no real serious shift in the situation there. 


"Part of the magnitude of this move is due to the fear gauge being so low for so long, but the Korean issue is starting to impact the market, despite no real new shift in that area. I also think part of it is people cashing out of high beta stocks given the more volatile environment, but a nearly 50% move in the VIX in five days can’t simply be blamed on profit taking. Fear is definitely returning and things could be shaky so long as the Korean issue remains front-and-center." -- Eric Dutram 

Until Tomorrow,
Jim Giaquinto 

Goodbye RTA!  

As yesterday’s ZU commentary mentioned, Steve thinks RTA subscribers should hold their positions for now and move toward other Zacks services. In other words, there’s no rush to sell all the names right now.

However, some subscribers didn’t like that option. So Steve offered a “Plan B”, which involves:

• Selling all RTA positions now
• Finding a new Zacks portfolio service by the end of the month, and
• Buy new positions from those services to meet your needs 

Make sure to get all the specifics from Steve himself in Reitmeister Trading Alert

Recommendations from Zacks' Private Portfolios:

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