US stock futures are following through to the upside this morning after a powerful intraday reversal during Wednesday’s session. Foreign markets took the cue from Wall Street overnight, shrugging off concerns in Portugal after parliament rejected the Government’s austerity plan. As promised, Prime Minister Socrates submitted his resignation, while his government will stay in place only through the end of the week, and warned that a foreign bailout might carry even more harsh austerity measures.
There were no new developments in the nuclear situation in Japan. Several countries have halted imports from certain Japanese prefectures over radiation concerns, and worries persist about the safety of drinking water in Tokyo. Also, there was no news to report from the Middle East, where coalition forces continue to assault Gaddhafi’s forces. On the economic front, be on the lookout for US jobless claims at 8:30, which are expected to be 385,000.
For more market and stock commentary, watch T3Live.com’s Morning Call with Jordan Kimmel, founder of the proprietary Magnet Stock Selection Process.
The fact that the market reversed so strongly yesterday tells us that it wants to go higher. Not even a barrage of negative headlines, compounded by the dissolution of the Portugese government, can hold stocks down at these oversold levels. The next level to watch will be the breakdown level from the wedge pattern, which stands around 1310-1315 on the S&P. If the bulls can overwhelm the bears today, we could be back to highs sooner rather than later.
Even before the market bounced yesterday, select stocks were going green and showing impressive strength. Stocks featured in the Morning Call- Baidu.com, Inc. (BIDU), Freeport-McMoran Copper & Gold Inc. (FCX), led the charge. BIDU exploded to make new highs earlier than anticipated, and FCX busted out of a recent consolidation since poking its head through a multi-month downtrend.
So now that yesterday’s moves have happened, what stocks can we look at today as the market looks set to follow-through? Marc Sperling’s Play of the Day yesterday was Amazon.com, Inc. (AMZN), which bounced to pierce through a downtrend of its own. The chart looks a bit like that of FCX a few days ago, providing great risk-reward after falling precipitously over the last month plus. The first target on the trade would be the $170 area, then $175.
Coal Stocks
With the aversion to nuclear power now growing by the day, coal companies have an opportunity to take advantage of the vacuum. Coal stocks have acted well since the nuclear disaster, showing relative strength. Some coal stocks to consider are Massey Energy Company (MEE), Peabody Energy Corporation (BTU), Arch Coal, Inc. (ACI), CONSOL Energy Inc. (CNX) and Patriot Coal Corporation, but our favorite looking chart in the group right now is Alpha Natural Resources, Inc. (ANR). ANR yesterday cleared a very big resistance zone and is set to open higher this morning. There isn’t much technically in the way of ANR getting back to highs around $68.
Could Banks Play Catch-Up?
Many leading stocks in the market made potent moves yesterday, and it’s hard to chase extended stocks in this environment. When the market shows signs it could make some upside follow-through, then you can start looking to more laggards for catch up plays. But if you are going to look at a lagging sector, make sure you play the leading stock in that sector. In keeping with that concept, we are looking at JP Morgan Chase & Co. (JPM), which is in a wide descending channel. JPM has become the clear leader in the sector, and is now holding higher within that channel. If the market catches a firm bid again today, look for JPM to provide a great risk-reward trade.
Silver Shining
The other notable big moves yesterday came from the precious metals. Gold is knocking on the door of new highs, while silver continues to lead the way, exploding to new highs. Miners also had a great day, and precious metal related stocks and ETFs look to be ready to make their next big run. Silver and silver miners are set for a healthy up open this morning.
*DISCLOSURE: Scott Redler is long JDSU, AMZN, SLV, POT, SOHU, FCX, AAPL, NYX, GLD, LEI, VLO; Short SPY. Jordan Kimmel is long SLW, LVS, JDSU, MGIC, ROYL.
This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by T3 LIVE or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. Visit the T3Live Homepage, Virtual Trading Floor, and Learn More About Us.
