The market appears to be ready to stabilize here at the mid-1,800 level for the S&P, which was where it started the year. This level is a potential target for bears. The sellers of stocks certainly backed away at the lows Wednesday, and there was significant short-covering and real money buying in the late afternoon. Note that the Russell 2000 small-caps were not hit quite as hard Wednesday morning and actually turned around to finish 10 points higher in the afternoon.
There are many stocks with “long tails” now, which means sellers probed new lows and then covered — and were replaced with buyers. That doesn’t mean that the selling is necessarily going to stop on a dime, but there are signs it may well at least abate for a few days.
My expectation is that the 1,700 level of the S&P 500 could be the ultimate destination, since that is the four-year uptrend line that has been tested many times since 2009. If we are experiencing just a correction in stocks, rather than the start of a whole new bear phase, you have to bet that level will hold. Since there are very few risk factors for a recession and outright bear market, you still need to give bulls the benefit of the doubt.
As such, I have a new long idea for you from the world of vehicle technology stocks.
Mobileye (MBLY) was not the most over-hyped initial public offering this year, but it might have been the most important. The Israeli company has developed a proprietary set of tiny sensors and cameras that help cars and trucks “see” each other and road conditions in a unique way. In addition to the hardware, it also provides vehicle manufacturers and consumers with a vast software database containing every driving and weather condition imaginable from studies done in 120 countries.
MBLY software and hardware will power the autonomous (or drone) vehicles of the future. But they are also being sold now, both to automakers and consumers. For instance, if your new car beeps at you when you drift out of your lane on the freeway near another vehicle, it is probably depending on MBLY technology.
The shares came public at $25, but the first trade was $37.50 back in early August. Shares then shot to $60 and have since drifted back to the breakout level at $42.50. Despite all the selling of late, MBLY has held steady for the last three days. Buy MBLY at $40.50 limit, good till canceled. If filled, set up to take profits at my target of $51.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
