Last week was the strongest one in many months for U.S. markets. The Dow Jones Industrial Average jumped 3.84% and the S&P 500 soared 4.57% in a massive relief rally after Congress’ last-minute shenanigans avoided the fiscal cliff. Global markets also continued their recent run, with the MSCI Emerging Markets Index (EEM) rising 2.95%.
It’s no surprise that your Bull Market Alert portfolio had one of its strongest weeks in recent memory. Your biggest gainers included turnaround play, Bank of Ireland (IRE), which soared 11.21%; your leveraged position in China through ProShares Ultra FTSE China 25 (XPP), which jumped 10.43%; Michael Kors Holdings Ltd. (KORS), up 6.20%; ProShares Ultra MSCI Emerging Markets (EET), up 5.80%; and the National Bank of Greece (NBG), up 4.97%. Discover Financial Services (DFS) and PowerShares Listed Private Equity (PSP) also jumped 4.80% and 4.34%, respectively.
You also booked no fewer than three triple-digit percentage winners in your Bull Market Alert portfolio. Specifically, you gained 115.38% on the first half-position in FXI options and 124.04% in the second half. You also sold all of your EEM options (in two parts) to book gains of 66.4% and 103.92%, respectively.
This week’s Bull Market Alert recommendation takes us back into China yet again, through upstart Chinese search engine company Qihoo 360 Technology (QIHU).
The 800-pound gorilla in the Chinese Internet search market always has been Baidu (BIDU). And with a market capitalization of $3.7 billion, Qihoo’s value is still just one-tenth of Baidu’s. But that relationship has been changing since August 2012.
Before launching its own search engine, Qihoo used Google’s search engine as the default on Qihoo’s popular 360 Web browser and home page. The relationship with Google allowed Qihoo to cement the No. 2 spot in China’s search market, after Google’s high-profile exit from the Chinese market.
Ironically, Qihoo’s fortunes took off when the company dumped Google and launched its own search engine on Aug. 16 that competes directly with Baidu. Within weeks, Qihoo gained about 10% of Chinese search traffic. Qihoo already had a large following thanks to its customer base for anti-virus software, as well as the most-used Web browser in China. About 303 million people used Qihoo’s browser in September, up 29% from a year earlier.
This increased traffic has been showing up in the company’s bottom line. Q3 earnings rose 25% to 20 cents per U.S. share, four cents above analysts’ expectations. Revenue climbed 77% to $84 million, beating estimates of $81.6 million. Monthly active users of Web and mobile products and services grew 19% to 442 million in September, as it gained market share from Baidu.
So buy Qihoo 360 Technology (QIHU) at market today, and place your stop at $25.50.
The stock has been on an absolute tear, and is technically overextended. So, I am going to hold off on recommending options until the stock consolidates its recent gains. Also, note that this is a volatile stock and may correct sharply at some point before resuming its upward trajectory.
Portfolio Update
Bank of Ireland (IRE) jumped 11.21% last week. Investors opened 2013 by piling into IRE on record volume — nearly one million shares on Jan 2. As I have argued for a long time, the “doomsayers” have been wrong on Ireland, and 2013 is set to be a turning point for the country. IRE is a BUY.
National Bank of Greece SA (NBG) rose 4.97% over the past four trading days. The Greek central bank published numbers last Thursday reflecting a rise in bank deposits for the third month in a row. They attributed this to greater political stability — a theme that will likely lead the Greek economy, and NBG, higher in the months to come. NBG is a HOLD.
Michael Kors Holdings Ltd. (KORS) rose 6.20% during last week’s broad-based rally, moving just above the 50-day moving average (MA). With margins above many of its industry peers and earnings per share expectations over 30% per year, KORS should continue to rally if it breaks the 50-day MA. KORS is now a BUY.
United States Natural Gas Fund LP (UNG) fell 5.39%, continuing to be the most frustrating position in your portfolio. Although down for the week on weak energy sector news, UNG moved higher last Friday when the Natural Gas Inventories report showed a 135 billion cubic feet (BCF) drop — nearly double from the report just one week ago. UNG is a HOLD.
PowerShares Listed Private Equity (PSP) gained 4.34% over the past four trading days. The good news on the “fiscal cliff” sets a positive tone for private equity in 2013, and this bullishness reflected well in PSP. PSP also managed to breech its short-term $10.25 resistance level last week — a key to sustaining the upside move. PSP remains a BUY.
Discover Financial Services (DFS) jumped 4.8% last week. Investors brushed off DFS’ recent earnings miss to push the stock up just short of its 50-day moving average last week. DFS started the New Year off right by offering customers a new card called “Discover it”™. This product is designed to attract new card members by offering no fees, rewards, and other unique benefits designed to provide a new “enhanced customer experience.” DFS is a HOLD.
HollyFrontier Corp. (HFC) dipped 0.92%. Despite a near across-the-board rally last week, HFC could not escape the sell-off in energy. Looking at a chart reveals that this dip could be a buying opportunity as HFC is nearing its 50-day moving average — which also happens to coincide with a recent support level. HFC is a BUY.
Apple Inc. (AAPL) added 3.42% for the week. With earnings season kicking off this week, AAPL will tip its hand once again when it reports earnings on Jan. 23. Expectations of positive holiday sales numbers may boost Apple’s price level in the weeks to come. AAPL is a BUY.
HDFC Bank Ltd. (HDB) traded flat yet another week. Although HDB has continued this pattern for three weeks as traders decide which way to move, 44 financial analysts collectively rank this stock “Overweight” as of last week. HDB is a BUY.
ProShares Ultra MSCI Emerging Markets (EET) jumped 5.80% over the past four trading days. Your position in EET popped last week on positive “fiscal cliff” news, and you sold all of your EEM options (in two half-positions) to book a 66.4% and 103.92% gain, respectively. You also sold half of your EET position for a quick gain of 11.72%. Hold on to your remaining shares for the next leg up. EET is a BUY.
ProShares Ultra FTSE China 25 (XPP) soared 10.43%. XPP jumped last week — allowing you to sell your XPP/FXI positions in a similar manner to EET/EEM. You booked 115.38% on the first half-position in FXI and 124.04% on the remaining half. Your sale of half of the XPP position yielded 12.9% in just two weeks. Hold onto the remaining shares as the emerging markets story is likely just starting to heat up. XPP is a BUY.
ProShares Ultra MSCI Japan (EZJ) closed up 3.97% for its first week in your portfolio. Japan rose as it continued to benefit from aggressive Bank of Japan stimulus. In fact, EZJ is now just $3.00 short of its 52-week, $65.00 high last seen in April 2012 and a very significant long-term resistance level. A break above this level clears the way to the $75.00 level, a potential 15% gain. EZJ is a BUY.
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