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My viewers will tell you, I've been banging this drum for the past few sessions in my "Money Morning LIVE" streams...
We should be ready for stocks to go lower before the bulls run again. But that's not necessarily bad news.
Let's set aside for a second the unique challenges weighing down stocks - the Delta variant, the global supply crunch, interest rates, regulations, take your pick.
Seasonality is pushing down on stocks right now, too.
There's no shortage of people on TV talking about it, but it's no mystery. Seems like folks always forget October is historically a "down" month. But it's immediately followed by historically strong rallies from November through January and beyond.
We've got less than four weeks left until it's off to the races, so we're going to start to build out a shopping list of stocks to buy while stocks are weak...
Grab These Stocks at the Opening Bell Today
Gambling stocks are fighting for market share as newer "social gambling" sites like Draftkings Inc. (NASDAQ: DKNG) and Penn National Gaming Inc. (NASDAQ: PENN) have been in the spotlight. The "Reopening 2.0" trade - along with a focus on gaining shares in the online and app gambling space - gives MGM Resorts International (NYSE: MGM) a leg-up on the competition. It simply has less work to do and less money to spend to protect its slice of the pie. It's in the gambling "sweet spot," and so is its share price, for that matter.
From a relative strength (RS) basis, MGM has turned into a leader in the gambling space as shares are breaking back into an intermediate- and long-term bullish trend.
In fact, the stock is breaking out of a multi-year trading range that began before the pandemic. Its 20-month moving average (not charted here) is developing an uptrend, which is a bright, clear indicator of a bullish longer-term trend.
I'd be a buyer right here at $44, and if it gets caught up in the wider October sell-off, I'd buy even more at $40. Your buddies may laugh at you, but you'll get the last one (and if they are laughing at you, turn 'em on to "Money Morning LIVE" and let 'em learn a thing or two about making money.)
Palantir Technologies Inc. (NYSE: PLTR) was a household name last year - if everyone in your household happens to be a trader. Its IPO was one of the most hotly anticipated of 2020, and investors rewarded the Big Data juggernaut with outsized post-IPO gains.
In fact, the company become "overloved" by investors after that IPO and quick ascent. Palantir also drew immediate attention from institutional investors, which worked against shares as the stock became bloated with bulls. This is always a recipe for a bear trap, which played out as a 63% drop in share price in early 2021.
And like a lot of other tech-centric stocks right now, investors are running away - fast. PLTR shares are heading back into August trading territory, caught up in the wider sell-off.
Sentiment on PLTR shares is undeniably bearish, but its technical trend is improving. If you've been around the block as often as I have, you'll know this is a bullish catalyst.
Shares are still trading 150% above its October 2020 IPO price, leaving it a leader in the technology sector, which is trading 35% higher for the same period. Higher highs and higher lows since May 2021 indicate the shares are moving comfortably into a new longer-term bullish trend. The 50-day moving average broke into a bullish trend in August for the first time since the stock corrected in early 2021.
Palantir is right up there on my buy list at market price, and if the sell-off continues or even accelerates, I'd be buying like it's going out of style at $21.
TripAdvisor Inc. (NASDAQ: TRIP) is an archetypal "Reopening 2.0" trade. It's an online travel company that's just about everywhere you look nowadays. September is usually a great time to book a flight, but the majors reported across-the-board slowdowns in bookings last month, thanks to the delta variant.
Nevertheless, much of the world is reopening to vaccinated American travelers right now. The European Union and United States have or soon will reopen their borders to one another's (vaccinated) citizens, and cross-border traffic is beginning to ease up between the United States and Canada - these are just a few examples.
And TRIP shares have been the most responsive to the reopening trade.
TripAdvisor is trading just below $36 - that's 70% lower than its all-time highs and 10% below its pre-pandemic prices, and after teetering on the brink of breaking into a bear market trend, shares of TRIP are now seeing a turnaround in their long-term 20-month moving average.
On the shorter-term view, the 50- and 20-day moving averages for TRIP are now shifting into "buy" mode as both are initiating a bullish trend reversal - a move I love to see. This indicates that buyers are now starting to buy shares after a prolonged bottoming at $32.
The recent spate of selling has seen the stock pull back from $37.50 toward $35, but that's just opening opportunities for buyers to increase positions in this newly minted trend.
I'd buy here at market, and buy heavily down to $34. I think the stock will see resistance at $40, but breaking through there gets it to $45 and then $50 easily by the time the bulls are running across the broader market again.
I think this small, $2 stock could be in for a potentially even bigger, faster move. It's already zoomed more than 1,145% over the past 12 months, and there could be an impending catalyst that sends it on another 1,145% ride over the next year. See, this company is looking to get its shares listed on one of the big American exchanges, and if that happens, I can easily see this stock as having the potential to blow past $5, $10, $15 over the next 12 months - this could possibly be a $20 stock by then. Learn why...
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.