A Few Diamonds in the Rough


With the market in turmoil and volatility at a very high level, traders continue to be stymied -- it's tough to make any money unless you are decidedly short. But, underneath the surface there are still some stocks that continue to perform extremely well, or could be close to a near-term bottom, and these are the ones that could present some nice opportunities for those who are patient.

Let's look at Kroger (KR), which recently reported earnings; since then, shares have soared close to 30% in just a few trading days.

Watching KR move substantially higher even with most of the market under fire is heartening. And the opportunity -- unless you are already long the stock -- could come along on any decent pullback. And a pullback could be coming with the stock now very extended.

To me, the first level to think about entering a position would be just above $54, which is roughly $5 lower. Even better if the stock were to pull back to a level just above $52, with a tight stop in case it moves below that level; this would take the stock back to the $49+ level, another place to consider adding shares.

Another stock that reported strong numbers and gapped up 40% on its earnings is Nordstom's (JWN), which has pulled back to a level that could make it a nice trade.

Nordstrom is nowhere close to Kroger's chart, but the volume on the buying shows there was a lot of buyer interest once earnings were released. And now it is caught up in the overall market selling, which I believe makes it a compelling buy (full disclosure, I took a position on Friday) with maybe a partial position near its current level and again if it pulls back back near its 20-/50-day moving averages.

In this market, it's very tough to pull the trigger on any position on the long side. But, if you are looking to participate in the substantial pullback we've seen so far, then you might as well zero in on those companies that recently reported strong earnings that are bucking the trend. In the meantime, if you're interested in getting timely market/earnings information every M, W and F, sign up for our FREE EarningsBeats Digest and let our Chief Market Strategist Tom Bowley guide you through these difficult times.

At your service,

John Hopkins

Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus