Trade Alert: Nibbling this old name as machines drive the market swings

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The markets have come down hard in the last couple months — and we were prepared for it, though we obviously didn’t nail the top with puts. Revolution Investing doesn’t mean that we get to avoid all the swings in the markets or that our stocks only go straight up.

I’ve been slowly adding some more long exposure but I’m still far from aggressive in my stance and buying. I’ve added a couple new positions and am seeing some Revolutionary companies’ stocks that are getting tempting as growth stocks like Fitbit get cheaper and start looking like good value investments too. I would like to get more aggressive in my buying and will do so if we get cheaper prices from here in the next few weeks.

Just a few weeks ago, in Revolution Investing world, I was writing that: “So Greece is off the table again for a few quarters but China’s a wild card. I don’t know how anybody can try to game where the Chinese stock markets are headed for the next few weeks, as the forces of panicked retail investors versus the Chinese Communist Party and U.S./EU governments battle it out. I’d rather stick with owning the best Revolution Investment stocks on the planet, hedging with some short positions on sorry tech companies and lousy food stocks and keeping our focus on the big picture.”

And sure enough, here we are and the China stock market has crashed further and taken our own stock market down rather hard with it. I wish we’d had more hedges on the portfolio sheets, and as you know I had puts in XLF and IBB but they expired just before this crazy sell-off action finally hit. The Biotech Index, which I’ve repeatedly said was in bubblicious territory and which I’ve been so bearish on for the last few months, finally crashed in its own right too.

Take a look at this chart though, which shows the Biotech ETF compared with the Nasdaq and the DJIA over the last three months:

What’s rather interesting about this chart is how correlated the broader indexes are with each other for the last three months. That’s a direct result of how algorithms and programmed trading is impacting the prices you see in front of you every day and how they are also exacerbating the volatility both upward and downward during these sharp swings.

And therein lies another advantage for us as Revolution Investors — we can sneak in and buy some of our favorite stocks while their prices are being driven by mindless bots, giving us the opportunity to buy stocks when the programs drive intraday crashes lower and to trim back those positions when the programs drive the intraday rallies into spikes.

As these machines drive the spikes and crashes over the next few weeks, we’re likely to get some very good buying opportunities.

Some of the stocks on my radar that I’d like to buy right now include:

Amazon $AMZN, FitBit $FIT, Palo Alto $PANW.

I’m personally nibbling on some Amazon, adding it back to our portfolio even though I had sold it a few months ago, as it remains a de facto standard in retail shopping and has been a long-time holding of mine as a Revolution Investment. I want it back on the sheets and am going to be looking to be aggressive about buying it below $500 a share, and am just starting with a 1/5 position today.