Pullback Targets and Opportunities

Kevin Cook here again for Steve for a few days as he travels...

The pullback really got rolling Tuesday with a 1.7% slide in the S&P and Dow. A few big funds must have flinched after the open and then everybody ran for the exits at once as it became obvious that the S&P's 50-day moving average at 1,372 wasn't going to hold. A test of S&P 1,350 was in the cards, but I didn't think we'd get this close in two days. Alas, I should have known better as bull markets typically take the stairs up and the elevator down.

The question for bulls like me becomes, "Do we start nibbling here now, especially after the Alcoa beat? Or, is this market going to continue to slip lower on Euro-contagion fears and hand us better opportunities?" One way to answer this is to think in terms of scaling into longs on the way down. First, you have to gauge the potential momentum and time frame of this sell-off. Then you have to identify what support levels are in target given that picture.

If you think a worse fear-driven drop is to come, its speed is a big factor. The market could sit for a day or two, and then the elevator resumes its fall. Fear is definitely on the rise not just because of Spain, but also because new longs are losing money and old longs are losing profits. So far, the pullback in the S&P from 1,419 to 1,359 has cost 4.2%. My estimate is that we could see 7-8.5% at the worst, which would target S&P 1,320-1,300.

But I think that unlike the Dow and Russell 2000, which have violated their March swing lows, the S&P will hold support at 1,340. So I would look to add there even more aggressively, but be ready to trade within the range since we likely won't see 1,400 again until May. As I noted here yesterday, when technical damage has been done, it takes time to heal.

It's still a bull market until further notice. And though earnings season probably won't give us many reasons to bounce hard, it will give us plenty of time and chances to buy good stocks on sale. To get you started on your shopping list, I can think of no better guide than the stock screening strategies of Kevin Matras in his Checklist for Picking Winning Stocks.


Best,

Kevin Cook
Senior Stock Strategist, Zacks Investment Research

Today's Top Stories: Wednesday- April 11, 2012

ZACKS RANK BUY STOCKS

• Aggressive Growth - Intuitive Surgical (ISRG) has beaten the Zacks Consensus Estimate in each of the last eleven quarters. Over the last six quarters, ISRG has beaten the bottom line number by an average of 12%. Read More...
   
• Growth & Income - Pool Corporation (POOL) Zacks Consensus Estimate for 2012 is now $1.75, representing 19% growth over 2011 EPS. The 2013 consensus estimate is currently $2.06, corresponding with 18% growth. Read More...
   
• Momentum - Old National Bancorp (ONB) total sales increased 36% compared to the same period in 2010. Earnings increased from $0.44 in FY2010 to $0.76 in FY2011. ONB is expected to earn $0.99 for the full year FY2012. Read More...
   
• Value - PACCAR (PCAR) in addition to a P/E under 15, which is my cut off for value, has a price-to-book ratio which just skirts in under my cut off for that metric of 3.0. Read More...
   

Learn how to profit from our exclusive Zacks Rank stock-ranking system with free resources. Read More...

• Top 5 Zacks #1 Ranked International Bond Funds Read More...
• Top 5 Zacks #1 Ranked Fidelity Mutual Funds Read More...
• Beware These Three Volatile Financial ETFsRead More...
• Five Emerging Market Infrastructure ETFs For The Coming BoomRead More...
• Fund Homepage

• Bull Of The Day: Cepheid, Inc.
  Full Zacks research report: Read More...
  
  
• Bear Of The Day: United Continental
  Full Zacks research report: Read More...
  
  
• Ahead of Wall Street
  Read More...
  


• Zacks Industry Outlook: Alt-Energy Stock Outlook - April 2012
  A major growth area in this space is Solar Energy. The U.S. has a lot of catching up to do, despite enormous potential, to get anywhere close to the global leaders. Read More...
  
  
• Analyst Blog Highlights
• DFC Global to Offer Notes
• Accenture Joins with SAS
• Terreno Updates on 1Q Performance
• Full Analyst Blog

• A Different Earnings Season
• Roundtable Top Picks for the Week of Apr. 9th
• QE3 and the Australian Dollar

PeopleAndPicks.com:

VIP "chris1929" is able to cushion the market pain with his BUY calls in (SDS), (SQQQ) and (TZA). Read More...

• ARE LANDLINES DOOMED? @ CNNMoney.com
• Market Preview: Now Earn It @ TheStreet.com
• Best Buy Cites 'Personal Conduct' for CEO Brian Dunn's Resignation @ FOXBUSINESS.com
• Why gas is more expensive in China than in U.S. @ MarketWatch.com

FACEBOOK

Visit the Zacks.com Facebook page and get the latest insight on stocks and the market:
Zacks On Facebook

TWITTER

Get the Zacks.com newsfeed delivered straight to your Twitter account:
Zacks On Twitter

OTHER ZACKS RESOURCES:

• Read current and past issues of this newsletter online
• Zacks.com Home Page
• All Zacks #1 Rank Buy Stocks (Premium)
• Equity Market Anomalies: Discover stock picking strategies developed by experts based on often overlooked market factors.
• People & Picks from Zacks: Share ideas and picks with the top stock pickers in the Zacks Community. Click here.

Manage your Profit from the Pros subscription:

• Free Subscription plus 4 Strong Stock Picks
• Would you like to give us input on new products and features for Zacks.com?
• Unsubscribe

REFER-A-FRIEND

If you enjoy this e-mail newsletter, then please pass it along to a friend. Simply forward them the link below to sign up for their own free subscription. THANKS!
Refer a Friend

Best,

Steve Reitmeister
Executive VP, Zacks Investment Research

p.s. What is the mission for Zacks Profit from the Pros? To find out how we will help you become a more successful investor, click here.

Visit /performance for information about the performance numbers displayed in this newsletter.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

To contact us by mail:

Zacks Investment Research
Attn: Profit from the Pros
111 N. Canal St., Suite 1101
Chicago, IL 60606

To unsubscribe from receiving "Zacks.com Profit from the Pros"
e-mail newsletter, Click here....