The market has remained weak during the session after a pre-market drop, seemingly triggered by resurgent fears over the nuclear situation in Japan. The severity of the crisis has been raised from 5 to 7, on par with Chernobyl. Although radiation leaks are not yet to the point of that historic disaster, some officials warn that it could eventually be worse. Combine that with a sub-par start to earnings season from Alcoa Inc. (AA) and investors are perhaps taking some profits at this stage.
Although the market has been weak, the S&P held its 21-day moving average, a good sign for the bulls. When a market comes in like this, it is important to scour the landscape for relative strength. And there are several that fit that have held up well in this weak tape.
Our apparel favorites Under Armour, Inc. (UA) and Lululemon Athletica, inc (LULU) have held in well, while the former has broken above yesterday’s high. After some morning selling pressure UA is regaining momentum to the upside and looks like it could re-test highs at some point this week. If you don’t want to chase it, LULU may present better risk reward after holding its breakout level.
Following up on the short call from Scott Redler on silver yesterday, the metal has been weak during the session once again after a gap up. After such a steep climb over the last several weeks, the iShares Silver Trust ETF (SLV) certainly has room to correct. Gold has been weaker after opening flat, retesting the breakout level from last week. If it can’t hold that level over the next few days it could be in for lower prices.
Chipotle Mexican Grill, Inc. (CMG) has also been strong after news that the company will unveil a new restaurant concept this summer. CMG will look to build on the quality fast food model with an Asian concept, ShopHouse Southeast Asian Kitchen, inspired by shophouses in Thailand, Malaysia and Vietnam. Investors have greeted the news and CMG is up more than 2.5% on the day.
Apple Inc. (AAPL) has also held in well, a positive sign for the market going forward. AAPL was very strong early, looking like it would erase yesterday’s losses, but has pulled back in and is flat on the day. The stock could still test support down at $326.26, but as long as it holds there or pushes higher from this point, it will buoy the market.
Research in Motion Limited (RIMM), Marc Sperling Play of the Day short on today’s Morning Call, is starting to get cracked as well. The company is not coping well with the formidable competition from Apple’s iPhone and Google Android-operated smartphones, and looks like it could be in for a a mighty fall. There is no support until the $50 level for RIMM.
*DISCLOSURE: Scott Redler is long INVE, HD, GLD. Short SLV. Marc is long AAPL, POT. SHort MCP, CYH, CIEN, NFLX, VRUS
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