US stock futures point sharply higher after a slew of impressive tech earnings reports after the close yesterday. Dow futures are up over 100 points this morning while commodity prices also gained overnight, with gold above $1500/ounce and oil above $110/barrel. While the market had been just trying to keep its head above water the past two days following the S&P-US debt warning, but overnight we are engulfing six days of unconvincing action.
After the close yesterday we saw a series of very impressive earnings reports mostly from the tech sector. VMWare, Inc. (VMW) is up more than 13% after its stellar report, set to open right at previous all-time highs. Intel Corporation (INTC) posted a blowout quarter and is up more than 5% pre-market. Wynn Resorts, Limited (WYNN) also posted an outstanding quarter as the casinos continue to climb, with WYNN the clear-cut best in group. Yahoo! Inc. (YHOO) also posted a strong quarter and is up more than 3% pre-market. Those are just the highlights, several other big names–including International Business Machines (IBM) and Intuitive Surgical, Inc. (ISRG)–beat estimates but are not being bought as enthusiastically.
For more watch the T3Live.com Morning Call video with Scott Redler and Alix Steel (below).
While the market had been restrained over the past two days, momentum leaders had already begun to perk up. Chinese Internet stocks SINA Corporation (SINA), Sohu.com, Inc. (SOHU), Youku.com, Inc. (YOKU) and Baidu.com, Inc. (BIDU) have been leading the charge to varying degrees, with SINA the strongest among them. Apparel stocks Under Armour, Inc. (UA) and Lululemon Athletica, inc. (LULU) have also been very strong, making new highs. Yesterday Scott Redler listed Rediff.com India Limited (REDF) as his Play of the Day, and the stock surged more than 18%.
But now with this monster up open, can we chase stocks at these levels or should traders stand pat? At this stage, it wouldn’t be prudent to chase the already extended stocks like SINA, SOHU and REDF, but rather rotate money into more of the big cap, high beta tech names. Amazon.com, Inc. (AMZN) is one to watch as it could break and hold above its most recent mini downtrend. Apple Inc. (AAPL) is breaking its downtrend, but with earnings tonight it might be best to stay away for now. Apple is sometimes subject to “buy the rumor, sell the news” on earnings, but with a depressed price right now that could cease to be the case.
The best looking set-up right now in that high beta tech group, though, is clearly Netflix, Inc. (NFLX). After soaring to new highs in February, NFLX had pulled off sharply with some whispers of possible competition for the streaming media pioneer. However, the stock bounced back to higher before pulling off again slightly over the past few weeks. Yesterday NFLX surged higher into an upper level pivot area, and obviously with this up open NFLX is up more than 1%. But right now NFLX still seems buyable for a move to new 52-week highs at some point in the near future.
A set-up that is more of a laggard type play is in the fertilizer group, which we have mentioned several times on this blog over the last couple years. Ferts continue to have a bullish long-term story, but often get punished harshly for period of a few weeks before bouncing back. These stocks have now started to rebound from their latest pull-in and are getting back above 21 and 50-day moving averages, a very positive sign. Group leader PotashCorp./Saskatchewan (POT) is just set to open above its moving averages, and should start to get more momentum long at this stage. CF Industries Holdings, Inc. (CF) and Agrium, Inc. (AGU) were already there after yesterday’s action while The Mosaic Company (MOS) still has a little ways to go, but the group usually goes together. This is definitely an area to watch.
After a big up open like this, it is important to measure the action early before blindly jumping in. On the T3Live.com Virtual Trading Floor, you can follow real, experienced professional traders throughout the trading day as they choose the best set-ups and make actual trades. Listen to live radios, view actual positions that update in real time, and participate in the chat room and community of like-minded traders.
*DISCLOSURE: Scott Redler is long NFLX, MGM, OIH, REDF, AMZN, POT, GLD, CYD, BKS, SOHU. Short SPY, SLV.
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