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Stocks Snap 3-Day Losing Streak

Stocks didn’t even come close to making up all of yesterday’s sharp losses, but it was nonetheless an encouraging end to a very rough week. Each of the major indices finished slightly on the positive side, which broke a three-day losing streak among rising geopolitical concerns. 

The S&P was up 0.13% today to 2441.3, while the Dow inched forward 0.07% to 21858.3. The NASDAQ had the best performance with an advance of 0.64% to 6256.6. 

“There is a strong belief that this market will finish at the highs of the year. As long as North Korea blows over, everything will be fine,” said Jeremy in Counterstrike

The war of words between the U.S. and North Korea took a heavy toll this week, as each of the indices were down more than 1%. It ended up being one of the worst weeks of the year so far. The S&P declined 1.4%, the Dow was off 1.1% and the NASDAQ slipped 1.5%. 

However, as mentioned yesterday, these tensions knocked the complacency right out of the market and gave the editors plenty of chances to make moves. North Korea may be a problem for a while, but the market continues to be strong. In the highlights section below, you’ll see a busy day for the portfolios as the editors took advantage of this new volatility by picking up a number of quality stocks at reduced prices. 

Today's Portfolio Highlights: 

Zacks Counterstrike: Jeremy has been waiting, hoping, even begging for some volatility in this boring market for a long time now…and he’s finally gotten it. This North Korea stuff has the fear rising and this editor buying. On Friday, he added these three positions: 

• Applied Optoelectronics (AAOI): This is a “dead cat bounce play”, as shares of this stock have plunged from $100 to $60. However, Kevin isn’t expecting AAOI to get back to triple digits, just bounce back to around $74 on short covering. It’s a move for some quick profits. 

• ProShares Short VIX Short-Term Futures ETF (SVXY): The editor does NOT think we are headed to war with North Korea, which means the VIX’s recent surge to 17 needs to come down. SVXY is a great way to short the VIX as it retreats to the 12-13 area. 

• Canadian Pacific Railway (CP): Shares have dipped despite beating on EPS and revenue in its last report. It has now moved into a coveted Fibonacci long setup, so Jeremy added it and plans to ride the stock toward its long-term target of $173. 

The portfolio is adding AAOI with a 7% allocation, while SVXY and CP each get 8% allocations. Read the complete commentary for a lot more on these moves, including a look at their charts. 

Insider Trader: The portfolio swapped out travel companies on Friday, as Tracey sold HGV due basically to a lack of interest for timeshares in the market. She replaced it by adding Summit Hotel Properties (INN), a REIT with 79 upscale hotels that includes brands like Marriott, Hilton and Hyatt. Shares are down more than 15% in the past month following a soft second quarter report. However, the CEO and the EVP & COO obviously feel that the selloff is overdone since they both bought shares of their own company recently. The complete commentary has a lot more info on this new addition. 

Options Trader: The portfolio’s bull call spreads in Dover (DOV) have declined to breakeven due to the market’s recent pullback. Kevin still likes the name, but now he needs more time since the Sept options only have about 30 days left before expiration. Therefore, he sold the soon-to-expire options and added a couple new bull call spreads by buying to open 2 Dec. 85.00 Calls AND selling to open 2 Dec. 90.00 Calls. With these December options, the portfolio has now extended its chances for profit by an extra 3 months. 

In addition, Kevin has been looking to add an energy company to the portfolio, and this pullback opened up a great opportunity. He decided to add a couple bull call spreads in Phillips 66 (PSX) by buying to open 2 Jan 85.00 Calls AND selling to open 2 Jan 90.00 Calls. Get more specifics on both of these moves in the full write-up. 

Income Investor: Air Products and Chemicals (APD) is a leading industrial gases company that recently reported a strong quarterly report, including an earnings beat, a revenue beat and a raised guidance. In addition to all of this, Neena likes that the company is a “dividend aristocrat”, which means it has grown dividends for a least 25 straight years. Its dividend yield is currently 2.6%. As announced yesterday, the editor added APD to the portfolio on Friday. The full write-up has more on this new pick. 

Stocks Under $10: Like most biotech companies, ImmunoGen (IMGN) isn’t profitable at the moment. But what caught Brian Bolan’s attention was two straight better-than-expected quarters and rising earnings estimates. Plus, the stock was down approximately 5% in yesterday’s pullback, so the editor got a bit of a bargain when he bought a position early this morning. Make sure to read the editor’s full commentary on this new pick. 

Momentum Trader: "Another day, another headlining tweet, but still, no World War 3. After a few tense sessions the market came to its senses a bit today with stocks rebounding a bit to close out the week. 

"It wasn’t a banner day by any stretch of the imagination but I’ll take it as a victory. Volatility calmed down a bit and may have stopped its forward progression. I’m sure after a weekend off that cooler heads will prevail into next week and we can get back to counting money. 

"For the record, I’m short WW3. That means I don’t expect to see a war breakout here. Yes there is incendiary rhetoric but at the end of the day I believe that’s all it really is. Barring a conflict, I expect the market to return to its winning ways as the NASDAQ bounced on the 50-day." -- Dave Bartosiak 

Have a Great Weekend,
Jim Giaquinto

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