Waiting for the Market to Bottom

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
This past week was a tough one for stock markets across the globe. The Dow Jones was down 2.07%, the S&P 500 dropped 2.21%, and NASDAQ fell 2.94%. Surprisingly, global markets held up relatively well, with the MSCI Emerging Markets Index down a mere 1.62%. Overall, however, it was the worst week for financial markets since June.
 
Despite the bad news, your Bull Market Alert positions showed remarkable relative strength, with five out of eight positions recording a gain. In addition, six of your positions are also still trading above your “rule-of-thumb” indicator of positive momentum — the 50-day moving average. 
 
Big gainers in your Bull Market Alert portfolio included National Bank of Greece (NBG), which rose 7.20% on news that the chances of an exit by Greece from the euro zone have now fallen. Last week’s bet, 3D printer company Stratasys (SSYS), ended the week in the plus column, and is trading right at its 50-day moving average. On the flip side, your volatile biotech bet, Medivation Inc. (MDVN), pulled back 8.26%, offering a solid point of entry before it bounces.
 
You were, however, stopped out of American Capital Agency Corp. (AGNC) as mortgage real estate investment trusts (REITS) continued to pull back from their remarkable recent run. Remember, though, you will receive a hefty dividend of $1.25 that is payable on Oct. 26 if you were shareholders of record as of Sept. 21.
 
Technically, the market is as oversold as it has been since it began its strong upward run in early June. This condition most often means that the market is within a week or two weeks of bottoming and turning sharply upward. These oversold conditions, combined with the strong seasonality of the market, makes me optimistic about the prospects for a strong run in the global stock markets between the next few weeks and the end of 2012.
 
This week, I’ll be traveling from London to Europe’s other great financial center, Frankfurt, Germany, to speak with German officials and investors about their view of the European debt crisis — and their perception of Germany’s commitment to keep the euro zone intact. This is particularly relevant to your position in both Bank of Ireland (IRE) and the National Bank of Greece SA (NBG). I’ll also be paying a visit to my old stomping grounds at the University of Heidelberg in Germany, where I spent a year studying economics and perfecting my German in the mid 1980s. I’ll report back to you on my conclusions from my discussions next week.
 
Portfolio Update
 
Bank of Ireland (IRE) lost 3.15% last week, making the past two weeks a near wash. IRE has roughly 565 million shares that trade openly (i.e., the “float”). Less than one million shares were “sold short” — held by investors who believe the stock will decrease — as of Sept. 30. That’s a very bullish sign in the months ahead. One cent above its 50-day moving average, IRE is a BUY.
 
National Bank of Greece SA (NBG) had a great week, jumping 7.20% on news that Citi reported the odds of Greece exiting the euro zone have fallen. Citi has reduced its estimates that Greece will exit the euro from 90% to 60%. And if it were to occur at all, the exit would not be until 2014. NBG is a BUY.
 
Novo Nordisk A/S (NVO) lost 2.78% over the previous five trading days. Drug-makers took a hit across the board last week as Deutsche Bank cut its sector-wide rating from “Underweight” to “Neutral.” This news weighed on the sector as a whole. NVO is scheduled to report earnings on Oct. 31. NVO is a BUY.
 
Seadrill Limited (SDRL) managed a gain of 0.51% last week, bucking the overall trend of the market. SDRL’s limited liability company, Seadrill Partners LLC, which SDRL formed to manage the business of operating its rigs, estimated its initial public offering last Friday at 8.75 million shares priced between $20 and $22 each. SDRL remains a HOLD.
 
Michael Kors Holdings Ltd. (KORS) gave back 0.90%. JP Morgan was the latest rating firm to show bullishness on KORS as it maintained its “Overweight” rating and increased its price target to $62.00 — 17% above Friday’s close. KORS is a BUY.
 
CVR Partners LP (UAN) dipped slightly by 0.56%. UAN traded flat early last week, but closed the week attempting to breech its $27.50 resistance level, a level set one month ago. This is rather positive trading behavior, given that the broader indexes dropped 2% last week. UAN is scheduled to report earnings on Nov. 5. UAN is a BUY.
 
Medivation Inc. (MDVN) gave back 8.26% last week after correcting from its 52-week high. The 15 FactSet analysts covering MDVN collectively rank the stock a “Buy” — their highest ranking. MDVN may touch its 50-day moving average this week — presenting a great buying opportunity. MDVN is scheduled to report earnings on Nov. 8. MDVN is a BUY.
 
Stratasys, Inc. (SSYS) held its ground as markets dipped, adding 0.58% during its first week in your portfolio. Although SSYS traded down early last week, Friday’s strong 5.5% gain was enough to put SSYS on MarketWatch’s “notable stock gainers” list last Friday. SSYS is still in the process of completing a merger with Objet Ltd. SSYS is scheduled to report earnings on Oct. 31. Resting just below its 50-day moving average, SSYS is a HOLD.
 
 

 

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