It was the toughest week in recent memory for the markets as the Dow Jones tumbled 2.23% and the S&P 500 fell 2.10%. Surprisingly, the MCSI Emerging Markets Index last week was essentially flat, down a mere 0.15%.
As a result of the market turbulence, you hit your stop price in Jazz Pharmaceuticals (JAZZ) and locked in a 35% gain on the stock.
You also booked a couple of strong option gains, 81.33% and 120%, respectively, on your position in Bank of Ireland (IRE), which continues to be one of favorite bets for the weeks and months ahead.
As I noted in last week’s Bull Market Alert, this is a tough time of the year to make — and enter — trading recommendations. In August, volumes are low, the market has pulled back sharply and market sentiment has soured.
That said, this is the best time to scour through the market rubble for some oversold positions that are set to rebound sharply in the days and weeks ahead.
And few positions look more ripe for a bounce than a company whose headquarters I stayed right next to this weekend in Silicon Valley, Google Inc. (GOOG).
Google, of course, needs no introduction. With more than 300 million users around the world a day conducting searches, it is by far the most popular search engine on the planet. Over 25 advertisers spend more than $150 million in advertising on Google each year. And its bevy of unrelated projects — driverless cars, Google glasses and the new Google Chromecast Internet TV device — position Google to dominate our lives for years to come. That’s why I’ve called Google the “GE of the 21st century.”
From a trading perspective, as one member of my staff put it, Google today looks like “a gift from the trading Gods.” Looking at a wide range of technical measures, the stock is massively oversold and is due for a bounce. If you happen to be a technical analysis buff, you can look at Fast stochastics, RSI, Bollinger Bands, support at both $850 and its 100-day moving average. The stock also is touching the lower trend line drawn on its one-year daily chart.
The bottom line? When you throw in an unwarranted negative mood swing of “Mr. Market” and a “heckuva” lot of other factors that have come together, Google appears due for a strong bounce over the coming weeks.
So buy Google Inc. (GOOG) at market today and place your initial stop at $800.
If you want to play the options, buy the December $900 calls (GOOG131221C00900000).
It was good to see so many you at the Money in San Francisco this past week. It is always terrific to connect with you in person.
Bank of Ireland (IRE) dipped 1.18%. IRE took a breather last week from its huge jump the week prior. However, you were able to reap excellent gains, closing half of your Oct $10 option position for an 81.33% gain, and another one with half of the balance for a 120% gain. IRE remains a BUY.
WellPoint, Inc. (WLP) gave back 1.53%. Deutsche Bank (DB) raised its price target for WLP last week after a recent meeting with the CEO of the Commercial & Specialty Business division. WellPoint outlined an aggressive new “land grab” strategy in the public health-care exchanges for 2014. DB said this approach was in sharp contrast with the more conservative approaches of WLP’s competitors and gave them an advantage. WLP is a BUY.
Celgene Corporation (CELG) fell 6.74%. Although CELG continued to pull back along with the broader markets last week, good news is emerging in the form of insider buying. One corporate director purchased 500 shares last week, and another bought 4,625 — the latter equating to a whopping $251,369 purchase, respectively. Celgene’s pullback may be short-lived, as both the 50-day and 100-day moving averages are looming large as distinct support lines. In addition, insiders only buy for one reason. CELG is a BUY.
Gentherm (THRM) lost 2.00% last week. Analysts’ expectations for THRM, as compounded by a recent Standard & Poor’s “Capital IQ” survey, show a collective average price target of $22.33 for Gentherm. This target equates to a 27% upwards move from Friday’s closing price. THRM is a HOLD.
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