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Quiet but Still Positive Start to Short Week

Jim Giaquinto

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A lot of traders decided to extend the President’s Day weekend, as Tuesday’s session was pretty quiet. The major indices started the day on the negative side, but managed slight gains by the closing bell despite slipping in the final hour.

The NASDAQ was up 0.19% to 7486.77, while the S&P advanced 0.15% to 2779.76. The Dow held onto the plus side by its fingernails with an increase of only 0.03% to 25,891.32.

Trade issues promise to be another big factor this week. President Trump reiterated that the March 1 deadline could be extended if the U.S. and China keep making progress. The meetings last week in Beijing provided some positive headlines, which hopefully will continue as the talks pick up again this week in Washington.

Of course, the most positive headline would be an actual trade deal!

Last week, the Dow and NASDAQ easily completed an 8th straight week in the green, while the S&P finished its third straight week higher and its 7th in the past 8. The market expects some sort of trade deal… and soon. The good vibes last week and the continuation of talks this week is keeping sentiment positive for now. 

“The market is pricing this (trade) deal in, so make no mistake that if talks break down the market will too. So, as we get closer to a deal over the next week or month, we will likely remain stuck between 2750 and 2800 in the S&P until we receive more clarity,” said Jeremy in Counterstrike.

Meanwhile, retail colossus Walmart had an amazing holiday quarter with earnings and revenue that beat expectations. Also, e-commerce sales surged more than 40%. Shares were up 2.2% today.

The company’s report was newsworthy in its own right of course, but it was all the more interesting coming after last Thursday’s bizarre retail sales report that saw a decline of 1.2% in December. So far, the market seems to consider that result to be a glitch, though we’ll know more when additional data is released.

Today's Portfolio Highlights:

Stocks Under $10: Shares of Veeco Instruments (VECO) went on quite a ride today, dropping sharply in the morning before rebounding to a slight gain by the closing bell. Brian Bolan has been looking to lessen the portfolio’s exposure to chips because he believes a China trade deal is already priced into the space. Therefore, this roller-coaster session provided all the excuse needed to sell VECO and take a nice 39% return in just a little over a month.

But the editor also bought today by adding Telenav (TNAV), a Zacks Rank #1 (Strong Buy) provider of location-based services. More specially, it offers voice-guided navigation on mobile phones. The company has a great history of beating quarterly earnings expectations of late, but Brian really liked that the positive surprises have been improving over the past four quarters. In fact, it has an average beat of 23.7% in that time. He believes that profitability is on its way to TNAV, so he added it on Tuesday and plans to buy again on Thursday. Read the full write-up for more.

Counterstrike: The portfolio made a couple classic Counterstrike moves to start the week. Canada Goose (GOOS) is a Zacks Rank #1 (Strong Buy) outerwear retailer. It makes those jackets with the distinctive patches that every other person seems to be wearing this winter. Last week, the company reported a positive surprise of 24% and raised its outlook for the full year. However, shares saw an aggressive selloff on margin concerns. Jeremy thinks the reaction is way overdone and that GOOS is set to reverse course and move higher again. He added it on Tuesday with a 5% allocation.

Ditto for Qualys (QLYS), the Zacks Rank #1 (Strong Buy) provider of cloud security and compliance software. The company beat by 27% in its recent report with revenue growth of 21% and record margins. However, the 2019 outlook wasn’t as strong as expected, leading to a sharp selloff. As with GOOS, the editor thought the pullback was too severe for a company with long-term potential in a growing and increasingly necessary space. He took advantage of the overreaction by adding QLYS with a 5% allocation. Read the complete commentary for a lot more on these moves.

Surprise Trader: This earnings season may be a bit long in the tooth, but there are still plenty of companies yet to report that could bring nice returns to the portfolio. Case in point, The Mosaic Company (MOS) is one of the world’s leading crop nutrition names… and it doesn’t report until after the bell next Monday. This Zacks Rank #2 (Buy) has a positive Earnings ESP of more than 2% for the quarter, while earnings estimates for 2018 and 2019 have been trending higher. Dave likes what he sees and added MOS on Tuesday with a 12.5% allocation.

Zacks Short List:
This week’s adjustment included a couple swaps, as the portfolio short-covered Weibo Corp (WB) and ConocoPhillips (COP). It replaced these names by adding GrubHub (GRUB) and Apache Corp (APA). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Black Box Trader: All four of the stocks that were sold in this week’s adjustment were positive, including one that advanced by nearly 10%. The positions that left the portfolio today include:

• Boot Barn (BOOT, +8.9%)
• NRG Energy (NRG, +5.6%)
• Rent-A-Center (RCII, +1.6%)
• Aspen Insurance Holdings (AHL, +0.5%)

The new buys that replaced these names are:

• Foot Locker (FL)
• McKesson Corp. (MCK)
• SpiritAeroSystems Holdings (SPR)
• Robert Half International (RHI)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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