The CBOE Volatility Index (VIX) started the week at 19.28, basically unchanged from one week ago.
In a nutshell, the VIX tells traders the demand for options - puts vs. calls - on the SPX 500. When demand is strong for puts then volatility is rising, and options are becoming more expensive as players seek protection from a potential market drop.
So why isn’t the VIX moving right now? TheStreet’s Bob Lang says the VIX lethargy should go away soon.
“I hear it all the time with the volatility index (VIX): "The indicator is broken" or "it doesn't work properly,” Lang said. “Indicators such as the VIX are simply telling us where money is flowing at certain points in time. Hence, it is always working, it just may not be doing what people expect.”
Recently the VIX drifted downward from elevated levels – at about 32%.
“That’s an historically high reading - average readings on the VIX are in the 18%-20% range,” Lange noted. “Yet, not only was this fear gauge elevated, it stayed above 30% for a long period of time, some 12 sessions in a row before closing at 29% and breaking the streak. When the VIX starts coming down it's a clear sign of a risk on environment.”
Lang adds that "in general, big moves in the VIX are often temporary and only last for a period of days, and then it falls. “Yet some short-term traders are “afraid of their own shadow”, and are probably sellers at the first sign of VIX-linked trouble."
Of course, “when there is a "risk off" day and it appears markets are going to be down - analyzing pre-market action and indicators - there is often a surge in the VIX, the indicator rising on demand for protection,” he noted. “But recently that has not happened during big down sessions. This past week was a good example. The evidence is there, market players are not pricing in uncertainty, which is the heart of the indicator.”
Lang also said the Federal Reserve is on a campaign to raise interest rates, with no upside end in sight. “It's hard to say, but when the VIX stays down during up sessions it clearly is telling us the chances of a surprise move are nil,” he said. “Before you tell me that it makes no sense, I'm just telling you the message of the markets.”
The bottom line? "Understand the role the VIX indicator plays in your trading and investing. “Be mindful of large moves up and down within the context of the markets and other indicators, too,” Lange advises.
What “buy the dip” stock are TheStreet’s analysts gauging this week? Here’s a snapshot.
Digital Turbine APPS $46.11. 5-day performance 7.13%.
TheStreet’s James “Rev Shark” Deporre is on the hunt for the best stock for the remainder of 2022.
With Digital Turbine (APPS), Rev Shark thinks he has a winner.
“There are several different approaches to choosing a 'top' pick for the remainder of the year,” he said. “If you’re trying to produce the biggest gain, then the best choice is likely to be a highly speculative small-cap stock. These stocks can fly or die because they have extremely high levels of risk. They need to be actively managed and are not a good choice for passive investors.”
For those purposes, APPS is a stock that has a very good balance between risk and reward and may not require the same level of trade management. “The valuation is very attractive, and it is in a great niche, but due to some uncertainty, it has enough risk that it can produce a substantial gain if the market embraces the bullish narrative,” Deporre noted.
Rev Shark describes Digital Turbine is the leader in end-to-end mobile advertising. It offers a media software platform that enables mobile operators and OEMs to control, manage, and monetize advertising on a variety of devices. APPS uses tracking systems and allows for targeted advertising.
(GOOGL) was putting new privacy measures in place that would limit some tracking. Apple (AAPL) had previously made a similar move which hurt Meta Platforms (FB).
“Yet analysts believe that the Google privacy changes will not have a significant impact on APPS and have kept growth estimates and price targets largely the same,” Deporre said.
The stock has had substantial growth and is looking for continued growth in the future. In its most recent quarter, revenue jumped 324%. For 2022 the company foresees EPS of $1.67 versus $0.74 in 2021, which is growth of 126%.
“In the last three months, four analysts have issued "buys" with an average price target of $94.50,” Rev Shark added. “The most recent from Oppenheimer is $117, and it noted that APPS is one of its top picks with a favorable valuation.”
Deporre believes that Digital Turbine stock has been under pressure since November as growth stocks fell out of favor but has bounced since mid-March and is forming a new base of support.
“Going forward, I feel that Digital Turbine is a solid pick for the balance of the year and should post a strong first quarter of earnings that will confirm its growth prospects,” he said.
Abiomed ABMD $326.41. 5-day performance 1.43%.
Recently on Mad Money, Jim Cramer spoke with Mike Minogue, chairman, president and CEO of Abiomed (ABMD), a medical device maker that was last featured on Mad Money almost a decade ago.
Minogue said a lot has changed since then. Back then, Abiomed had $126 million in sales with 70 patents. Today, they're over $1 billion in sales with 1,300 patents and another 1,300 pending. More importantly, Abiomed grew from just 7,000 patients to over 220,000 patients today.
“Minogue said Abiomed is the heart recovery company,” said TheStreet’s Bruce Kamich. “He showed off the world's smallest heart pump, one that doesn't require cutting open the chest, but instead can be inserted via catheter through the leg or even the shoulder in just minutes.”
Heart disease is still the No. 1 killer in the U.S., but heart attacks are no longer a death sentence for patients, Minogue added. It’s growing every quarter and is helping patients both at the bedside and also via the cloud, with patient monitoring solutions.
Thus, now’s a great time for Kamich to check out ABMD’s charts and indicators.
“This week, we can see that prices made a small double bottom in January and March,” he said. “Prices held the $280-$270 area. ABMD is trading above the 50-day moving average line and just below the 200-day line. The trading volume was very heavy in January and February and lighter on the March "retest".”
Additionally, the On-Balance-Volume (OBV) line has improved from the middle of January suggesting that buyers of ABMD have been more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator is just now crossing above the zero line for an outright buy signal.
In his point and figure chart, Kamich sees a potential upside price target in the $384 area, with the potential to climb to the $422 area as a possible price target.
“Aggressive traders could go long ABMD on a dip to $310 if available,” he said. “Place risk to $290. The $384 area is our first upside price target.”
Palo Alto Networks PANW $623.06. 5-day performance (-) 0.04%.
Outside of energy and defense names, not many stocks are hitting 52-week highs. That’s especially true in technology, said TheStreet’s Bret Kenwell.
Kenwell does see one stock that’s moving upward over the past week. It’s Palo Alto Networks (PANW), which has been in strong demand from investors, hitting highs in four out of five sessions last week.
“As our dependence on the internet and connected devices continues to grow, cybersecurity has been a growing concern among companies,” Kenwell said. “For instance, Okta (OKTA) was recently breached and left Microsoft (MSFT) exposed to some extent.”
In the past, it’s been everyone from tech to retail that has felt the effect of cybercrime. With geopolitical issues heating up, cyberwarfare is now becoming a thing to worry about as well. That’s all beneficial to Palo Alto Networks.
“We’ve seen PANW shares rally more than $100 apiece from last month's low and erupt over the prior high at around $599,” Kenwell said. “With the move, it had investors wondering about the upside.”
More conservative bulls can use the January range, which has an upside extension near $645. Aggressive bulls may prefer the upside extension for the current range near $655.
“If we split the difference, we get roughly $650, so that may be a prime upside target to look for,” Kenwell said. “Again, more conservative traders can punch out a little early, while more aggressive bulls can try and press for more gains.”
Kenwell said that aggressive longs can dip their toe in near $600, where Palo Alto Networks stock previously topped out. Other bulls may consider waiting for a dip down to the 10-day moving average, which should act as short-term trend support.
“It would be even better if the two could align,” he said. “Otherwise, conservative traders would prefer a dip into the prior highs near $570, along with the 21-day moving average and daily VWAP measure.”
