During the past couple of weeks, we have experienced substantial volatility in the markets, which has scared many investors, and is unfortunately something we have been become too well acquainted with recently. The pattern of unsatisfactory reports coming from the earnings calendar is continuing, introducing worries about the economy’s potential to rebound as the Fed tries to take a step back. U.S. stocks have been on a collision course, the Dow saw its most horrible selloff in several months with its seventh triple-digit drop on Monday.
The Standard & Poor’s 500 Index is dealing with its toughest January since 2010, and earnings stories at companies from Mattel (MAT), Exxon (XOM) and Amazon (AMZN) continue to frustrate investors. Amazon declined almost 9% after it documented profit and sales that trailed analysts’ estimates. Mattel sank 9.5% after a decrease in Barbie sales. Exxon Mobil claimed a 1.8% decrease in upstream volumes. Wal-Mart Stores (WMT) fluctuated after releasing data indicating that profit will be at or under the low end of its earlier predictions as winter storms, and lower food-stamp benefits damaged U.S. sales.
Markets (including emerging markets) have turned out to be much more unpredictable during the past 20 years due to an outflow of money from institutional investors, mutual funds, hedge funds and high-frequency trading. For short term traders, sell-offs can be stressful. However, we have been here before over the last five years and – until we see evidence to the contrary – the primary bullish trend is still intact.
Using the flow of the earnings calendar and buying on the dips is a risk, but there are some good values in the market right now. We have been trying to target firms with strong fundamentals that have already pulled back to long-term support levels – for example, Tupperware Brands Corp. (TUP). It has a strong business model, an extensive global footprint and is expanding on a smart business strategy which has been generating record earnings and growth.
The stock pulled back to long-term support recently after missing earnings expectations on Jan. 29. The earnings report (and a reduced outlook) was unfortunately released on a day that the rest of the market was selling off quite dramatically on concerns about emerging markets. However, the selling may present some interesting buying opportunities as investors seem to have overreacted to recent bad news.\
Get our recommended trade for TUP.