This week it’s time for some fun stocks to buy… with sneakers, games and lattes.
Over the last couple of weeks we’ve been talking about stock market situational awareness. Last week I introduced a threat level assessment commonly used in law-enforcement – white, yellow, orange and red. I concluded that we’re currently in the orange threat state – we need to be on our guard but it’s not clear that disaster is truly imminent.
Not much has changed in terms of the broad stock market with respect to our indicators. The S&P 500 is still fluctuating around its critical volatility level – the Smart Trailing Stop.
We did see some deterioration in price this week. The Smart Moving Average also continues to deteriorate. There is definitely reason to be concerned.
But there are also real reasons to be suspicious of the popular “end is nigh” storyline, some of which I shared last week. The most serious concern is in the area of sentiment. The very fact that we’re all scared to death about the markets is the biggest reason to be suspicious that a collapse is imminent.
So this week I wanted to bring you a couple of incredibly strong investing ideas that I’ve uncovered during our research this week.
There’s a definite theme to the ideas that I’ve uncovered this week – fun and games.
Let me show you what I mean.
Our first strong stock of the week is Nike (NYSE: NKE). Take a look:
Here we have an incredible example of a strong stock that pulled back into the Low Risk Zone during the market correction in August, did not get stopped out by its Smart Trailing Stop and then rocketed to new highs.
It’s particularly impressive to see this kind of performance while much of the rest of the market is rapidly deteriorating.
Another similar example we came across this week is video game maker Activision Blizzard (NASDAQ: ATVI).
I’m not sure what exactly it is that’s driving this theme of fun and games. Maybe we’re all dealing with the stress of today’s markets by seeking out comfort and entertainment.
In support of this theme I’d like to share with you one more investing idea that may well be on the verge of repeating the breakout patterns we’ve seen in Nike and Activision Blizzard. The stock in question is Starbucks (NASDAQ: SBUX):
Here we see the same pattern of a sharp pull back into the Low Risk Zone that didn’t reach all the way to the Smart Trailing Stop. Starbucks corrected about 15% – just shy of its current volatility level of 15.7%. Since then it has rocketed back up about 13% and is just shy of making new all-time highs.
So this week, consider a little stress relief of your own by taking a look at the opportunities in sneakers, games and lattes. It could be a lot of fun!
To enjoying investing,
Richard M. Smith, PhD