The futures are basically flat overnight as traders and investors wait anxiously for the first jobs report of 2011 at 8:30 am EST. After a stellar ADP jobs report earlier in the week showed a sharp increase of ~300,000 private sector jobs, optimism for this month’s government report on non-farm payrolls and unemployment rate is bubbling under the surface of this market. Active traders at T3Live.com like to cut down on positions and remain flexible into an important economic report like this one, especially as expectations grow.
Expectations for today’s report have risen to around a gain of 150,000-175,000 non-farm payrolls, higher than the earlier prediction of 143,000 and a sharp rise over the 39,000 gain we saw in November. Unemployment, a lagging indicator, remains one of the last major worries of the economic recovery. While a miss this morning could trigger a sharp sell off given the high expectations, a meet or beat could trigger a tsunami of new investment as skeptical investors get more confirmation that the actions of the Fed are actually producing desired results.
Jobs Number Will Change Everything
With highly anticipated jobs numbers like this morning, it is important to come up with contingencies on the long and short side for a beat and miss. However, it is hard to fully plan for the trading day ahead with such a game changing report on the way, according to T3Live.com’s Scott Redler. With the market extended, it is already hard to come up with real A+ trade setups. Although not exactly an original idea, Redler believes Apple Inc. (AAPL) has significant upside. Apple bears, he says, are missing a great value AND growth story.
For more commentary on individual stocks, click over to Redler’s daily Morning Gameplan Pricepoint Sheet at T3Live.com. Immediately following the his morning’s jobs report, click back over to T3Live.com for a post-report video.
Clouds Lifting On Solars Stocks
The light, illiquid tape that we saw yesterday afternoon has made traders somewhat cautious about trying to aggressively enter new positions, according to T3Live.com’s Marc Sperling. He will likely scale back my intraday trading activity if that trend continues. One sector, though, that Sperling says he will keep a close eye on is the solar sector. Solar stocks significantly underperformed last, with the Market Vectors Solar Energy ETF (KWT) trading nearly 28%. Over the last month or so, however, the solar stocks have based nicely and appear to have at least put in a short term bottom. Perhaps all of this volatile weather has people focused back on climate change as preoccupation with the economic recession wanes.
As a rally gets more extended and exhausted, some these lagging sectors start to move, like we saw with some of the ‘forgotten’ banks like Citigroup Inc. (C) and Wells Fargo Company (WFC) in the past few weeks. JinkoSolar Holding Co., Ltd. (JKS), a newer issue, in particular is one in the sector Sperling likes to watch. The stock has poked its head above the 21-day moving average for the first time in nearly two months despite a strong market. He believes JKS can get above $25 in the next couple weeks. The leader of the group, First Solar Inc., also looks bullish after breaking above the recent pivot of $133.50 yesterday. The measured move would take FSLR back to near 52 week highs around $150.
Beware, though, because when lagging sectors start to perk up, it can often be a sign that long money is getting exhausted as investors look for ‘cheap’ alternatives to the leading stocks and sectors. The market has so far been as resilient in 2011 as it was in 2010, so traders should only start to show caution, not start to lean short, according to Sperling, until something drastically changes with market composure.
Recent China IPO Back On the Radar
While rare earth stocks have died down slightly over the last couple of days, two recent Chinese IPOs have come back on the radar after consolidating: Youku.com Inc (YOKU) and E Commerce China DangDang (DANG). The so-called Youtube and Amazon.com Inc (AMZN) of China were exceptional momentum trading vehicles in the days after their introduction to the market, but have rested until now. The one Steve Levay of T3Live.com is watching more closely is DANG, which had 7 down days in a row until yesterday. Today, he will be looking to buy DANG over yesterday’s highs of $28.62. For a slippery trade like this Levay advises to keep my stops tight at $27, but believes we should see at least $30-31 over the course of the next few days and eventually a move back to all-time highs. Again, the stock must take out yesterday’s highs to trigger. The trade presents a highly attractive risk-reward ratio of $1.50 to make possibly $3-5.
*DISCLOSURE: Marc is long C, JKS, FSLR. Steve is long DANG. Scott is long DANG, FSLR, SOL.
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