Quite a few market participants are hopeful that today's poor action will help to create a short term bottom. It is logical as the market will be oversold going into some very favorable seasonality but in view of the destruction that has been done to charts recently it is foolish to be confident of anything.
With emotions running high there is a good chance of higher levels of volatility that should provide some trades in the indices but my focus is on individual stocks. I'm seeing quite a few that look like they are washed out and finding support. That will be my focus into the end of the year. They need to show more strength for me to put cash to work but I like the looks of the opportunities that are developing.
One example is Aimmune Therapeutics (AIMT) . The company has an immunotherapy drug for peanut allergy. On November 12, Nestle Health Sciences announced a $98 million investment in the company giving it a 19% stake. This past weekend the results of its study were reported in the New England Journal of Medicine and the company expects to submit its results to the FDA in December. Yesterday it was reported that the CEO bought around $100,000 of shares at around $27.56.
The chart looks terrible but there is some support around the high 25's and it is the sort of name that has many positives but is suffering from a miserable biotechnology market. I'll be looking to add to a position once it exhibits better price action.
Speaking of a stock suffering from a poor sector. Kohl's (KSS) is under heavy pressure although it beat its earnings estimates and increased guidance a little. It trades with a P/E of 14 and grew EPS this quarter by 40% so its not a bad value.
The problem KSS faces is that reports from retailers are being automatically sold in this poor market right now. It doesn't much matter what they report. The selling is aggressive and without regard to fundamentals. When the market finds some support and this corrective action comes to an end, Kohl's may be a good buy in the retail sector. However, at this point overall market conditions make it difficult to have confidence in an investment at this time. Price action is more important than the fundamentals and right now the price action is extremely poor.