Bullish enthusiasm has been tempered in the market this morning after China’s central bank lifted interests rates in an attempt to stem the tide of rising inflation. Futures are basically flat after the decision. Yesterday the market blasted off above highs with widespread strength and bellwether stocks displaying leadership.
At this point, it still feels like this market needs to rest a bit after a 3.5% move since last week, which came in the face of troubling jobs data. From a technical perspective, there are not a lot of A+ type trades after many stocks broke out yesterday. Traders had to be quick and bold to scoop shares Friday, January 28, if they wanted any sort of “buy the dip” scenario. Last week we saw a swift reversal, and that alarming sell-off now feels like a distant memory.
Apple Breaks Out
Apple Inc. (AAPL) had a period of manic action following Steve Jobs’ announcement that he would take a third medical leave of absence, but righted the ship and broke out to new highs once again yesterday. Investors could not ignore the stellar earnings this quarter from the tech giant, continued popularity of the iPad and the early success of the Verizon iPhone. Long term, Apple remains a compelling value story as well.
Wynn Separating Itself from Casino Pack
Last week we looked for Las Vegas Sands Corp. (LVS) earnings as the potential catalyst for another leg higher in the casinos, but the company disappointed with a mediocre report. Since the announcement, LVS has been weak, fading into the lower trendline of the long-term wedge pattern.
Meanwhile, true group leader Wynn Resorts International (WYNN) has recovered back toward the highs. The company has seen several analysts raise price targets into the $140 area, and Macau revenues continue to explode. If you want exposure to the casinos, WYNN is your best bet. Short term, if WYNN breaks above yesterday’s high of $119.25, it should definitely see new highs. MGM Resorts International (MGM), the laggard of the group, is gapping up this morning into the upper end of its recent lower range. It could be a good catch-up type trade.
Intel Looks Poised for a Run
Intel Corporation (INTC) is a former hot stock of the tech era that has recently become a slow-mover within the tech sector. The company delivered a record quarter last quarter, but still investors are not excited about the company’s growth prospects. Intel has a very sound balance sheet with a current ration of 3.5, sits on a boatload of cash and even raised its dividend by 15% at the end of last year to 72 cents per share annually (~3.3%). The stock is also a great value play, with a forward P/E of less than 10 and a peg ratio of only 0.86.
Technically, although Intel is somewhat of a slow mover, it looks poised for a big move. If you look at the weekly chart, the stock has put in a head and shoulders pattern over the past year with a neckline at $22. The measured move would see Intel run to $26.
*DISCLOSURE: Scott is long AAPL, INTC; Short SPY.
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