The market is narrowly red in Tuesday’s session, continuing to digest the two-week bounce back to multi-year highs. We have seen some follow through selling from yesterday’s reversal, especially in some leading momentum names. The indices are holding up relatively well compared to our momentum trading watchlist, and sell in May, go away looks like it could be in full effect.
Our highlighted short call from the Morning Call this morning was Baidu.com, Inc. (BIDU). Some money is really starting to flow out of these Chinese Internet names, and with astronomical valuations it’s really no wonder. BIDU didn’t take long to accelerate through support at the $146.50 area, plummeting at one point to below $137 in a flash-crash sort of move, before quickly bouncing. BIDU is starting to creep back up, but is still down more than 3% on the day. SINA Corporation (SINA), Sohu.com Inc. (SOHU) and Youku.com, Inc. (YOKU) are also down on the day 5%, 4.6% and 3.75% respectively.
Apple Inc. (AAPL) is hanging in well after frustrating some traders yesterday who were looking long following Nasdaq rebalancing. It appears investors still have some apprehension with AAPL in regards to Steve Jobs’ future and some supply chain issues in Japan. Scott Redler believes you can be long AAPL here with a stop at $345.50, for an eventual break of the mini downtrend up through $352.
The next two compelling short set-ups at this stage are the Oil Service HOLDRs ETF (OIH) and Chipotle Mexican Grill, Inc. (CMG). With yesterday’s break lower out of a tight consolidation, OIH signaled major weakness and has followed through today. The $150 level is major support in the ETF. CMG flushed in the morning down near support, which stands just above $260. A break below that level would likely trigger down to the $240 area.
The rare earths have been strong after a sector upgrade from Dahlman Rose. Molycorp, Inc. (MCP) continues to be the strongest, up more than 10% on the day. Silver is near flat after some early weakness and continues to be the focus for quick traders.
*DISCLOSURE: Scott Redler is long SLV, AAPL, JPM, BAC.
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