Last week we started seeing some choppy, erratic action in the indices and leading stocks. Stocks on my “go-to list” started breaking their upper ranges and getting into some cash was a good idea. We noted that the trade has changed to a certain degree and it was time to prepare contingencies. At this point, with the futures getting again after yesterday afternoon’s selling, we are going to get the opportunity to trade the SPY and high beta tech stocks in both directions. It hasn’t happened in a while, but you can make money short and some shorted Amazon.com, Inc. (Nasdaq:AMZN) and Google Inc. (Nasdaq:GOOG) when they broke their upper ranges. If you sell into exteneded up moves, you can put yourself in a position to test lower levels and take advantage of over emotion.
I am entering today short the SPY from yesterday as well as some other stocks. I will look to cover the SPY into the 1185-1188 area and then look to see if we get to the 1177-1182 area. If we get there today it could be buyable, especially with GM IPO coming out. I feel that the forces at will would like a up-day tomorrow. I see some previous support in that area and it’s the 25% retracement of the entire move from 1040 to 1227. If we get to that area it will put us about 50 handles off the highs. The 38.2% retracement and the 50-day is around 1155-1160. That won’t happen today most likely but it is also in the back of my mind as a key area. That area would need to hold for any chance of a Late November–December rally for the end of the year.
Tech. Most leading tech has broken its 21-day moving average, a sign that the trade has changed. As the market is faltering a bit, I initially focus my attention on these stocks and forget about some of the other smaller guys that I look to play in an up-trending market.
Apple Inc. (Nasdaq:AAPL) has held in well. My gut tells me we will be able to buy this in the 290-295 area.
Google Inc (Nasdaq:GOOG) gave us some signs of weakness as it broke the accelerated uptrend around 223. Now let’s see how it handles the earnings gap around 590-594.05.
Amazon.com, Inc. (Nasdaq:AMZN) was a great short yesterday, I wasn’t involved. I will look for a scalp long today. The 152-156 area is big support; it could do a Red Dog reversal as well. It’s the first go-to stock to test its 50-day.
Baidu.com, Inc. (Nasdaq:BIDU) had a break out failure. Fast money traders could try and short Baidu if it breaks 107.81.
*Disclosure: Long AMZN; Short SPY and NFLX
