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Big Rebound as Fear Subsides and Netflix Reports

Investors finally had some bargains to consider on Tuesday, which allowed the market to recover nearly all of yesterday’s sharp selloff. Meanwhile, earnings season reached another gear after the bell when the first FAANG reported.

And just like that, everybody is happy again! It never ceases to amaze how quickly the market’s mood can change. The NASDAQ jumped 1.57% (or about 223 points) to 14,498.88, which more than makes up for Monday’s slide of 1.06%. The S&P rose 1.52% to 4323.06, or just 0.07% shy of completely recouping its recent deficit.

Of course, the big story yesterday was the Dow, which plunged approximately 725 points as fears of the Delta variant and rising inflation led to the index’s worst session of the year so far. But it recovered just under 550 points on Tuesday, marking a rally of 1.62% to 34,511.99.

There were signs last night that the Monday pullback was an overreaction and a recovery could be in the cards today. A late rally helped the S&P close above its 50-day yesterday after trading below that technical level earlier in the session. And stock futures were on the rise overnight.

"Monday's plunge was an overdone knee-jerk fear-driven reaction, which was exemplified in the about-face price action on this fine Tuesday of trade," said Dan Laboe in Headline Trader. "Once the S&P 500 found footing at its 50-day moving average in Monday's late afternoon session, buyers have come in and bid up virtually every sector of the market."

Elsewhere, Netflix (NFLX) became the first FAANG to report this season. The streaming pioneer’s second quarter results were mixed, with revenues and paid subscriber growth beating expectations but earnings missing by 6%.

Shares of NFLX were down slightly in the session by 0.23%. But afterhours its up 0.8%, as of this writing, which is impressive in a market that usually doesn’t reward mixed results. Perhaps investors are a bit excited that the company will finally be getting into gaming.

The big reports tomorrow include Johnson & Johnson (JNJ), Texas Instruments (TXN), CSX Corp. (CSX) and dozens of others.

Today's Portfolio Highlights:

Insider Trader: Online schooling was a big winner during the pandemic, which explains why shares of Aspen Group (ASPU) soared last year. However, this online post-secondary education company is now down 38% year to date, despite reporting fourth-quarter revenue growth of 35% a week ago. The insiders obviously see a buying opportunity here, as ASPU continues to expand and works toward opening a new campus at the end of F2022. The company enjoyed a ‘cluster buy’ last week with four insiders buying shares after the quarterly report, including the CEO, the Chief Operating Officer and two directors. Tracey added ASPU on Tuesday with a 10% allocation, though she suggests you stay nimble as this small-cap stock could be volatile. The editor also added 5% to the Matador (MTDR) position since energy stocks are deals after the recent selloff. Read the full write-up for more specifics on today’s action.

Surprise Trader: Alternative energy names don’t usually make it onto this portfolio’s radar, but today there was an exception. Dave added NextEra Energy (NEP), a “growth-oriented LLP” that acquires and manages clean energy projects with stable long-term cash flows. This Zacks Rank #1 (Strong Buy) has topped our earnings expectations in each of the past four quarters, and now has a positive Earnings ESP of 13.33% for the report coming before the bell on Friday, July 23. The editor added NEP on Tuesday with a 12.5% allocation, while also selling Signet (SIG) for a 5.2% return in less than two months. Read the full write-up for more on today’s moves. In other news, this portfolio had a top performer today as Controladora Vuela Compania de Aviacion (VLRS) jumped 7.3%.

Stocks Under $10: This portfolio had two double-digit winners in Tuesday's session. First of all, recovery stocks bounced back nicely from yesterday's selloff, which helped Freightcar America (RAIL) jump 10.7% and become the top performer of the day. The other big winner was, of course, Cassava Sciences (SAVA), which advanced 10.4%. It's not among the top performers of the past month at the moment because of all the market sluggishness of late, but let's remember that SAVA is still up more than 1100% in the portfolio since being added less than five months ago.

Large-Cap Trader: Another performance worthy of a mention on Tuesday was aluminum giant Alcoa (AA), which advanced 10.5%. The company is still living it up after a strong second-quarter report from July 15, which included a positive earnings surprise of more than 10%. The stock also got some help today after an upgrade from a major firm.

Zacks Short Sell List: The portfolio cashed in three double-digit winners in this week's adjustment. The five stocks that were short-covered today included:

• PLBY Group (PLBY, +39.4%)
• Maxar Technologies (MAXR, +21.1%)
• GoodRx Holdings (GDRX, +17.5%)
• Delta Air Lines (DAL, +8.3%)
• Chegg (CHGG)

The new additions that replaced these names were:

• Incyte Corp. (INCY)
• Marvell Technology (MRVL)
• StoneCo (STNE)
• T-Mobile US (TMUS)
• TripAdvisor (TRIP)

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

Until Tomorrow,
Jim Giaquinto

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