The one certainty in the stock market right now, I’d say, is volatility. Both to the upside and to the downside. So I think we should take what the market is giving us.
Using these three moves in the short term.
1. Buy a few buy on the dip candidates from my Dip-Meter on JubakAm.com that are strong today. (I’ll post the updated Dip-O-Meter later today on the JubakAm.com site.) I’m adding SunRun (RUN) down 40.83% as of the Friday, March 26 close from its January 8 high at $96.50. The entire solar sector is up strongly today on the Biden administration’s big $2 to $3 trillion infrastructure package. As of 12:20 p.m. on Wednesday SunRun shares were up 11.58%. I’m also adding shares of Teladoc (TDOC) on today’s bounce of 4.19% as of 12:30. As of the close on March 26, Teladoc was down 39.8% from its February 12 high. And finally I’d adding PayPal (PYPL) up 3.34% as of 12:30 p.m today. The shares were down 20.9% as of the March 26 close from their February 16 high. (You could make an argument for buying Square (SQ) instead of PayPal, but while these are short-term momentum buys I still give some weight to the quality of the company and Square has done some, to my mind, questionable things lately and I am troubled by the huge reliance on revenue from BitCoin. As of March 26, Square shares were down 22.8% from the February 19 high. Shares of Square were up 7.68% today as of 12:30 p.m.) I’m adding all three of these stocks to my Volatility Portfolio in my subscription JubakAM.com and JugglingWithKnives.com sites today. They are short-term trades.
2. Add a few post-vaccine economic recovery stocks on the likely good news on March jobs set to be published soon Friday and on the boost to earnings growth rates in the upcoming earnings season from comparisons to a truly dreadful quarter in 2020. I’d got two can dilates in mind. First, is Disney, which I’ve been eying for a while because I was hoping to get in at a better price. Disney is down 1.70% in the last week and the shares are up just 2.47% for 2021 as of the close on March 30 (vs a 5.47% gain for the Standard & Poor’s 500.) This drop doesn’t make them cheap, but it’s about as good an entry point as I see for a while. With the opening of the company’s California park in April, plus increased visitation at the Florida park, plus gangbuster growth from the Disney+ streaming service, I want to own this one was the economy show strength with the rollout of pandemic vaccines. I’m adding Disney today to my Jubak Picks Portfolio with a 12-18 month target price of $218. (It’s already a member of my long-term 50 Stocks Portfolio.) I’m also adding what I’ve called in my videos a Disney-like stock, Build a Bear Workshop (BBW). The company was hit hard to the need to close so many of its stores during the pandemic but management has done a terrific job of moving the business to the Internet. I’ll have a longer write up later today. I’m adding this one to the Volatility Portfolio as of March 31.
3. And I’m using the current complacency and good feeling ahead of earnings to add to my hedges in the VIX. The so-called fear index was down below 19.51 again (off 0.51%) as of 12:30. I’d buy Call Options on the VIX whenever it dips below 20 because, as we saw on Monday when the VIX climbed 11.6% on the day, the bounce from complacency to fear can pop this index big time. I’d look to buy as much duration as is affordable–August or September would be good–because I see the Federal Reserve rattling financial markets with announcements on when it will scale back its purchase of Treasury bond and mortgage-backed assets from the current $120 billion a month sometime in the July to September period. That talk from the Fed will set off speculation (again) on when the central bank might decide to raise interest rates (sooner rather than later?) And I’d also buy Put Options on the Russell 2000 ETF, the iShares Russell 2000 ETF (IWM). This index of small cap stocks is very sensitive to shifts in sentiment about the economy. It has been climbing lately on confidence about the economy’s near term performance. Which gives me a chance to add Puts for September at a reasonable price. (The Put options will appreciate if investors and traders lose some confidence in the economy as we look toward a fall with worries about the Fed and about a fourth wave of the pandemic.) I’d look to buy September Put Options with a strike price of $217 to $220. The ETF was trading at $220.46 at 12:30 p.m. New York time on March 31. I already own options on the VIX and on the IWM in my Volatility Portfolio on my JubakAm.com and JugglingithKnives.com sites. I will look to add more if I can get a significantly better price on the current complacency.