Huge Relief Rally on Hopes of Stimulus Plan

OK, let’s remember that there are always big bounces in bear markets and that one strong rally doesn’t mean our troubles are over.

That being said… it sure did feel good to see the market bounce back so forcefully on Tuesday!

We were due for something like this, especially after starting this week with another sharp selloff yesterday amid a pullback that has each of the major indices down by more than 30% from highs reached just a few weeks ago.

We don’t even have a stimulus package yet. Just the possibility that the two sides are getting closer to an agreement was enough to send the Dow on its biggest single-day points gain in history.

The index closed back above 20K after soaring 11.37% (or 2112.98 points) to 20704.91. The S&P jumped nearly 9.4% to 2447.33 and the NASDAQ rose 8.12% (or around 557 points) to 7417.86.

Relying on Congress is certainly a flimsy reason to rally, especially since they’ve had opportunities to pass a stimulus bill for days now.

However, these are extraordinary times and the market knows that the government will have to pass something soon as several states shutdown to try and contain the sickness.

Meanwhile, President Trump wants the country opened by Easter. That’s less than three weeks away! The market would certainly LOVE to be open by then, instead of predictions for a shutdown that would last well into the summer or longer.

It’s something that more and more people are thinking about these days, as we get halfway through a second week of being shut-ins. How long will this last? At what point does shuttering the world’s largest economy do more harm than good?

It’s hard to believe that we’d throw caution to the wind in such a way while coronavirus cases are still on the rise. And, unfortunately, that’s the situation we’re in right now.

However, it’s not a bad idea to start thinking about how we could get back to business when the sickness starts to wane. Not only should we have a plan in place anyway, but it’s something encouraging for investors to think about as we wait to turn the page on this virus.

Today's Portfolio Highlights:

Home Run Investor: Online businesses are certainly doing better in this environment than ones that operate in the “real world”, so a cloud security company like Zscaler (ZS) is in a sweet spot. The stock got beaten up along with everything else, but Brian believes it has already started to recover as evidenced by its share price soaring toward $65 again from a bottom of around $40. Plus, ZS now has four straight quarters with triple-digit surprises! The editor added ZS on Tuesday and thinks this position will continue to reward the portfolio as the market gets back on its feet.

Counterstrike: Finally! We got a strong relief rally this morning on hopes of a stimulus deal. No one knows what will happen from here, but while we’re soaring Jeremy decided to make a few moves to existing positions in the portfolio. The editor added 4% more to CME Group (CME) and RH (RH) each. He also sold half of Texas Roadhouse (TXRH) for a nice 15.6% return in about two weeks and half of eHealth (EHTH) for a 9.3% profit in about a month. Read the full write-up for more on today’s moves. BTW, RH was the best performer of the day among all ZU names by climbing 29.4%.

Stocks Under $10: The portfolio wants to get more aggressive right now, so the first of possibly two additions this week was Avid Tech (AVID). The company is a Zacks Rank #1 (Strong Buy) provider of a wide range of software and systems for creating and manipulating digital media content. It was part of the portfolio earlier this month, but Brian is getting back in at a better entry point because he feels the stock has a lot of room to run from here. Earnings estimates for this year and next have improved, as has its net margin. Read the complete commentary for a lot more on this new addition.

TAZR Trader: Kevin has been waiting for a relief rally for a while now, which was why he bought ProShares UltraPro S&P500 (UPRO) last Thursday. Well, we finally saw a really nice surge today on hopes of a stimulus package, sending the S&P higher by more than 9%. Therefore, UPRO surged 28% on Tuesday to become the second-best performing position of the day among all ZU portfolios.

Zacks Short List: The portfolio cashed in two double-digit returns on Tuesday as part of this week's adjustment. The positions that were short-covered today included:

• Agnico Eagle Mines (AEM, +15.6%)
• The Trade Desk (TTD, +15.6%)
• IAC/InterActiveCorp (IAC)
• Wynn Resorts (WYNN)

The new buys that filled these spots were:

• Insulet (PODD)
• JD.com (JD)
• Mimecast (MIME)
• Sina (SINA)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Good Evening,
Jim Giaquinto

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