The market opened lower this morning, but unlike yesterday, was not able to fill the gap. The market rarely does same thing twice in a row, so we were cautious this morning. Short term support is 1172-1177, and a close below that level would create another ‘day to take notice’. Major support is now at 1162-1166, and its possible we could get there today.
The market was not able to fill the gap, but a few stocks we put on the radar this morning did before failing. Netflix Inc. (NFLX) and Baidu, Inc. (BIDU) pushed through yesterday’s high and then failed. For traders looking for more short term set-ups, the “Red Dog Reversal” trade got you short on a trade back down through yesterday’s high, as I indicated in my morning price point sheet. Apple Inc. (AAPL) filled the gap early but failed at resistance. Stock could not get above 309.50-310.50 and hold like I would have liked. Amazon.com, Inc (AMZN) is pulling back into the recent base and needs to hold 165 for my short-term complexion to remain bullish on the stock. MakeMyTrip Limited (MMYT) never triggered its pattern above 40.45, but its a stock we will continue to watch. VirnetX Holding Corp (VHC) opened around 18 and couldn’t hold, either.
Gold continues to work lower. We sold the macro position above the $1350 price target and might look to buy back around the 50-day at $1,298, but will look for a reversal pattern for a more defined entry signal.
Banks are acting a bit better than past few weeks, but we are not excited here. With fraudclosure worsening, we will stand far away from most bank stocks for the time being. There could be an opportunity to buy these laggards like Bank of America Corp (BAC) in the near future, but risk and uncertainty are still too high right now. We still like Goldman Sachs Group, Inc. (GS), though.
Last week I sold most macro positions so I can purely day trade and limit risk in this time of uncertainty. Will the Fed come out with QE2 amid a growing chorus of skeptics? Will the Republicans take back Congress and create political gridlock at a time that necessitates decisive action? We don’t know the answers to these questions, and we are in a tricky spot, especially in regards to the Fed. How will the market react if they come in with a low-ball QE2 figure when stock were potentially pricing in $2 trillion? What’s working is choosing longs carefully and avoiding the temptation to get aggressively short.
A very speculative play we are watching is Power-One, Inc. (PWER). The chart looks pretty good, and there are some strong whispers that earnings will beat and guide higher Thursday after close. I will not buy the stock into earnings, but I bought some November 10 calls for a 1.50. These type of stocks can still do well even if market gets pressured or becomes choppy.
