The market has filled the gap this morning after a slight gap up, once again finding it difficult to break through the last resistance zone before multi-year highs. On Friday the market traded higher in to that resistance level before being turned away in the afternoon, and it appears investors are remaining cautious here after a ferocious three-week bounce back in the market. The indices could see some sideways action for a couple days before regaining strength for a move back to highs.
Chinese Internet Stocks Lead
Select stocks that have shown relative strength over the past couple weeks have remained strong, with some once again making explosive moves. The leader of the pack is hot Chinese internet name Sohu.com, Inc. (SOHU), which was highlighted by Scott Redler on today’s T3Live.com Morning Call. The stock broke out last Tuesday, and despite pulling in the following day, it had bounced back well Thursday and Friday. Opening at the top end of that range this morning, Redler liked it as a long candidate, and the stock has exploded higher once again, gaining more than 5.5% so far. Fellow Chinese internet sensation SINA Corporation (SINA) has also been strong, up more than 4% on the day.
Precious Metals Take a Breather
The big story pre-market was the precious metals, which opened sharply higher. Both the SPDR Gold Trust ETF (GLD) and iShares Silver Trust ETF (SLV) have traded in a tight range and are down slightly. Miners, however, have added to pre-market gains, with Silver Wheaton Corp. (SLW) and Coeur d’Alene Mines Corporation (CDE) up 3.7% and 2.8%, respectively. Both still have some room back to recent highs while silver is at new highs.
Oil Servicers Still Holding
Oil and oil servicers continue to hold in, while the Oil Service HOLDRs ETF (OIH) is the best risk-reward technical trade at this stage. OIH is basing in a tight flag near 52-week highs, and could be building some energy for another explosive breakout. Schlumberger Limited (SLB), the largest component of the OIH ETF, naturally looks similar. If you prefer to trade a company stock rather than the index, SLB seems like your best bet.
Apparel Looking Good
In the apparel sector, Under Armour, Inc. (UA), which was featured in the Morning Call last week, took its turn breaking out last week, gaining nearly 8% on Friday. The stock was first mentioned on the show as a potential “me too” play after a breakout by Lululemon Athletica, Inc. (LULU), and the cycle could next come back around to LULU. Since its big move LULU has held in well in a tight upper-level flag, and looks like it could be a another great momentum buy above the previous high of $90.97. Under Armour is holding well, too, and could see some continuation.
Watch for RIMM Breakdown
It’s not prudent to search for shorts in such a weak tape for anything more than a quick intraday trade, but the chart on Research in Motion Limited (RIMM) seems to be screaming for lower prices. The company has been beaten down by the success of the Google Android operating and the Apple iPhone, and the most recent earnings report was very poor, causing a big gap down. The stock got an oversold bounce early, but has ticked back down to the lows, teetering on the brink of a momentum move lower.
*DISCLOSURE: Scott Redler is long AAPL, F, SOHU, BAC, V, GLD, JPM, GOOG, Short SPY.
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