Stock futures are pointing to a higher open once again Monday after the market bounced back to highs last week. The potent sell-off from Friday, January 28th rattled some investors, but is now just a distant memory. The market shrugged off Friday’s low non-farm payrolls number, which also came with an unexpected drop in the unemployment rate, a troubling sign that many discouraged job seekers are leaving the labor force.
Potential pressure on the market has also been eased in Egypt, where protests have calmed and many business seek to return to normal. Data is light on Monday, with only December consumer-credit data at 3pm ET. AOL Inc. (AOL) has announced a deal to buy the Huffington Post for $315 million as the company seeks to build a new media empire.
Continue to watch Apple Inc. (AAPL) this week after it broke above the recent pivot high on Friday. The stock is gapping up this morning to all-time highs, proving maybe life isn’t so dismal without Steve Jobs.
Watch Strong Earnings Stocks
While it’s often prudent to scale down positions in a stock heading into a potentially volatility-inducing earnings report, there is often great opportunity to trade stocks for a period after earnings, says Marc Sperling of T3Live.com. He says to look for stocks that reported good earnings and revenues that gapped up and held.
Netflix, Inc. (NFLX) is a perfect example of this phenomenon. The company had another strong report, gapped up and based for five days before a continuation move on Friday. Sperling feels the stock still has significant upside, with still a large short interest set to get squeezed.
PotashCorp./Saskatchewan (POT) is another strong earnings play in a leading sector. The stock gapped up on the announcement that POT would double its dividend and initiate a stock split later this month, and has now based nicely in its upper range. Sperling feels the next move for POT should see it at $190-195. We also like the fundamental story in the fertilizers for this year, with POT as our favorite.
Finally, in the cloud computing sector, Acme Packet, Inc. (APKT) reported blow-out earnings but got some decent rest in the upper level. Be careful chasing as active traders like bases to get good prices and defined risk parameters, but Sperling believes APKT still has room to run. International Business Machines (IBM) and Green Mountain Coffee Roasters Inc. (GMCR) are two other stocks that fit the description of strong earnings stocks that could see follow-through.
Ford Makes a Super Splash
Ford Motor Company (F) got some visibility with its Super Bowl ads yesterday, although the locally targeted spots were somewhat non-descript. The company, along with Chrysler with its Eminem commercial, continues to try to rehabilitate the image of the American auto industry after bankruptcies and bailouts. Ford is easily the strongest company among them, having avoided a bailout, but recently has gotten bad press with extensive vehicle recalls and disappointing earnings.
The stock has gotten hit hard, and was down more than 20% last week before a slight bounce Thursday. Ford provided a text-book opportunity for a RedDog reversal trade Thursday. A RedDog reversal consists of an oversold stock that trades through the previous day’s low and back above it. A trader then enters on the break back above the previous day’s low with a stop at the new low, looking for a sizable bounce. The fundamentals continue to remain mosntly strong for Ford as production and revenues are growing, and the company carries a forward P/E of only $8.15. The only concern is a current ratio of 0.97, indicating greater current liabilities than current assets.
After the sharp decline in F stock price, this could be a great area to enter long, says Evan Lazarus. Much like the long trade we recommended last week in F5 Networks, Inc. (FFIV), Ford provides a great risk-reward scenario at these levels. The stock is gapping up slightly this morning.
*DISCLOSURE: Marc has no positions. Scott is long AAPL, BIDU. Evan has no positions.
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