Pausing for Breath after Booking Some Well-Timed Gains Last Week

Wall Street finally broke its four-week winning streak, with the S&P 500 dropping 1.07% and the MCSI Emerging Markets Index tumbling 2.66%. Worries surrounding Fed tapering; a “Black Swan” style collapse in the Japanese stock market last Thursday; and weak manufacturing data from China all combined to unnerve investors. Another 3% dive in Japan’s Nikkei on Monday, combined with a rebound of 1.41% overnight to start the trading week, will continue to keep investors on edge this week.

Your Bull Market Alert portfolio weathered the market turmoil well, the market sell-off notwithstanding.

With Japan tumbling a breathtaking 7.2% last Thursday, you were stopped out of ProShares Ultra MSCI Japan (EZJ) for a gain of 14.31% on your remaining half of the position. You recorded a 16.16% gain on this position as a whole.

In a well-timed Special Alert last Tuesday, I recommended that you sell half of your $50 call options in WisdomTree Japan Hedged Equity (DXJ) to lock in 66.67% gains in just seven trading days.

At that time, you also sold half of your September $85 calls in Stratasys Inc. (SSYS) to lock in 51.01% gains.

Finally, last week’s Bull Market Alert recommendations — a pair of Irish options bets — Jazz Pharmaceuticals (JAZZ) and Bank of Ireland (IRE) soared 30% and 33.33%, respectively.

Given that JAZZ rocketed 9.24% and IRE jumped 4.71% last week, you would normally expect the options to soar even more. But this just shows you the impact of wide “bid-ask” spreads in both of these options, which range between 20% and 27%.

Finally, Melco Crown Entertainment Limited (MPEL) fell 3.37% last week, slipping below its 50-day moving average, and it has now moved to a HOLD.

I’ll be back with a new Bull Market Alert recommendation next week.

Portfolio Update

Bank of Ireland (IRE) jumped 4.71% last week, as it continued with its second test of the $10.00 resistance level over the past three weeks. IRE appears well-positioned to move above $10.00, supported by its 20-day moving average. Despite being one of the hardest hit regions during the European debt crisis, the Irish economy is expected to grow 1.1% in 2013 — the third-fastest gross domestic product (GDP) growth rate in Europe. IRE is above the 50-day moving average and is a BUY.

Melco Crown Entertainment Limited (MPEL) fell 3.37% last week. As the cleanest gambling play on Macau, MPEL stands as the clear long-term winner on growth when compared to its largest rivals — Las Vegas Sands (LVS), Wynn Resorts (WYNN) and MGM Resorts International (MGM). MPEL’s three-year return is 311%, compared to its competitors’ three-year returns of 206%, 113% and 6.45%, respectively. MPEL dipped below its 50-day moving average and is now a HOLD.

Delphi Automotive (DLPH) dipped 0.97%, giving back just a bit of its previous week’s 7% gain. DLPH’s main competitors are Denso Corp. and Magna International, and DLPH is best-in-class when profit margins are compared. DLPH currently reports a 17% gross margin and 10% operating margin, compared to Denso’s 16% and 7%, and Magna’s 12% and 5% margins. DLPH is a BUY. Raise your stop to $46.40.

Stratasys Ltd. (SSYS) lost 3.31%. SSYS’s recent dip relating to last week’s “3D-printed gun” controversy is likely a news-driven buying opportunity, as there has been no material change in the company’s outlook. Analysts’ estimates still forecast a 38% earnings per share gain next quarter. If nothing else, the hullabaloo over the gun controversy demonstrates the true “disruptive” power of 3D-printing technology and the impact that this technology will have on the industrial landscape in the near future. SSYS is a BUY.

Jazz Pharmaceuticals (JAZZ) rocketed 9.24% last week. Pharmaceutical stocks rallied across the board last week, and JAZZ was no exception. JAZZ gained steam after breaking above the thrice-tested and long-term $60.00 resistance level, making new 52-week highs all week. Look for a special alert in the following days, should JAZZ continue its moon shot. JAZZ is a BUY. Raise your stop to $58.50.

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