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Gap Up to Get Down

Jim Giaquinto

Hey everybody, Dave Bartosiak here filling in for Jim “Jimmy G” Giaquinto. The Ultimate Editor will be back to business as usual next week.

This market just can’t seem to hold onto a rally. The overnight fade was in full effect today as yesterday’s late-day rally led to buying in Asia and Europe. By the time we opened stateside, equity markets were up about a half-percent. The bad news is we could not hold onto those gains as the fade algos kicked up to full steam and the market was put under pressure. Chalk it up to continuing trade war pressure, a theme which has been running for weeks now.

Despite selling off all day from the open, the market managed to find itself inching into the green today when compared to yesterday’s outing. The S&P 500 finished the day higher by 3.80 points or 14 bps at 2,826.10. The Dow Jones Industrial Average added 95.20 points or 37 bps at 25,585.70. The NASDAQ Composite was good for 8.73 points or 11 bps at 7,637.01.

Chart of the Day

Facebook (FB)


Facebook was very representative of what most of the market saw this week. The gap down from Wednesday afternoon to Thursday morning was met with selling most of yesterday’s session. Today the overnight bid stalled out nearly at the open, ticking up close to the top end of Thursday’s range. From there, the selling pressure mounted and the stock found its way lower throughout the course of the trading day.

I’m keeping an eye on not only yesterday’s low of $179.67, but also the swing low of $178.10 from May 14th. That May 14th level provided some solid ground for the bulls to make a stand. Between both those levels lies the 50-day moving average up at $179.48. Hopefully that provides plenty of support.

Portfolio Moves

In Surprise Trader, yours truly made an addition and subtraction in the portfolio. Today’s addition was the beauty store Ulta. The stock reports next week and has an excellent record of earnings beats. It has only missed estimates once in the last twenty quarters.

The only other move today came from Kevin Cook in Healthcare Innovators. Kevin removed Biotelemetry from the portfolio in order to free up some space for new additions. He’s still bullish on BEAT’s prospects over the long run as it’s only trading at 3.2x current 2020 sales estimates. That’s well below the median peer comp of 5x sales. He’ll have a big update on the portfolio this weekend.

Conclusion

Trade tensions continue to dominate the scene here in the investment world. This week wasn’t an exact replica of last week but there was a similar feel to it. If we end of gapping down again on Tuesday, I’ll be looking to add names in the hope of catching a move off the lows just like we’ve had two weeks in a row. The 200-day moving average is going to popping up on a lot of radars as well.

 

Have a great weekend,

 

Dave

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