The Green Bay Packers weren’t the only ones to defeat the Bears; the market continues to push higher in spite of erratic action last week that many thought could forecast an impending top. The jury is still out, though, on this most recent thrust higher despite the Dow making new highs, as there are still some areas of concern.
Clouds Heavy
Cloud computing stocks continue to be a drag after taking a dip on the F5 Networks, Inc. (FFIV) revised guidance. FFIV has dipped below Thursday’s low this morning on heavy volume, and salesforce.com, inc. (CRM) also gapped down below its low. The last cloud debacle, triggered by a growth warning from Equinix, Inc. (EQIX), was a buying opportunity. This time around, however, cloud stocks are having a hard time finding solid ground to walk on.
Ags Grow
The agricultural stocks, on the other hand, have begun to repair themselves after last week’s heavy selling. When Cargill announced plans to sell its 64% stake in The Mosaic Company (MOS), investors interpreted it as a call that a top was in. The growth story for fertilizer stocks remains very strong for 2011, however, and we feel the group, with PotashCorp./Saskatchewan (POT) our favorite among them, has significant upside.
Tech Leaders Try to Bounce
At the end of last week, we noted that selling in leaders Apple Inc. (AAPL) and Google, Inc. (GOOG) was a potentially ominous sign for the market. So far this morning, AAPL found support with willing buyers at $327 and has continued to bounce, while GOOG is struggling to bounce after the gap down. The next resistance if you are actively trading AAPL is $337-338, so you could look to take some shares off there if you want to lock in some profits. It’s been tough sledding for another tech leader Amazon.com, Inc. (AMZN) over the last four trading days, and in situations like this Scott Redler of T3Live.com likes to look for a calculated reversal trade. Watch for a trade back above Friday’s low of $177. If that triggers, place your stops at today’s low just above $174 and let it run.
Solars Stay Hot
The sun continues to shine on the solar sector after Goldman Sachs Group Inc. (GS) upgraded group leader First Solar, Inc. (FSLR) this morning. After showing significant relative weakness during the rally in Q4 2010, the solars have once again as a potential trading vehicle and investment opportunity. LDK Solar Co., Ltd. (LDK) and ReneSola Ltd. (SOL) are two solar stocks that are highly ranked on Jordan Kimmel’s Magnet Stock Selection System, while Summer 2010 IPO JinkoSolar Holding Co., Ltd. (JKS) is exhibiting significant strength on a breakout this morning.
Bottom in Rare Earth?
A sector to pay special attention to today is the rare earth stocks, namely Molycorp, Inc. (MCP). This morning initially this morning reported a secondary stock offering, triggering a sell-off in the stock. MCP ended up being halted, and then clarified the release with an announcement the company would be doing the secondary offering to fund an expansion of its California Mountain Pass mine that is expected to double production at the facility. Molycorp is the only rare earth stock with earnings and is the clear cut leader in the group, and today’s announcement could signal a bottom in the sector.
Banks and Casinos
We have also been following the banks and casinos closely this year, but right now there are better areas to have your money as both sectors take a rest. Both groups, we feel, have significant upside this year and long-term, however, so if you are looking to diversify a long-term portfolio take a look at group leaders Wynn Resorts, Limited (WYNN) and Las Vegas Sands Corp. (LVS). WYNN has been stronger of late, flagging near highs, but LVS is near the bottom of a nice long-term wedge pattern that could ignite to the upside. Goldman, despite a weak quarter, remains our favorite in the financials group, with Jamie Dimon led JP Morgan Chase & Co. (JPM) getting the silver medal.
Gold, Silver Remain Weak
Precious metals are having a hard time getting a significant lift, but they are another area that a long-term investor could look to buy towards if they do not already make up a portion of a portfolio. Technically Gold and Silver look somewhat broken, so you may have to be willing to average down a bit, but despite recent weakness our thesis continues to be buy the dips in commodities. Recent policy measures have bred complacency and a flight to equities, but problems still persist in Europe and with municipal debt. In other words, the fear trade is still alive. At the same time the action of the Fed has laid the groundwork for high future inflation, which is already coming to bear with food and commodity prices.
State of the Union Highlights Week Ahead
This will be a very interesting week as we are in the thick of earnings season, the President’s State of the Union, and another FOMC meeting. Given the crosswinds and news events we have over the last week, T3Live.com’s Redler says he is abandoning a swing trading approach and focusing on more short-term, low risk set-ups. The majority of the selling has come the Russel 2000 and the Nasdaq, which provide leadership in healthy, booming markets. We have a new point of reference from last week at 1272 after we sliced the uptrend, but didn’t fall apart.
Jets Disappoint
On another note, the Jets disappointed us New Yorkers last night with a lackluster first half. They dug too deep a hole, but salvaged pride with an impressive fight back in the second half. In the end, you just can’t show up to the AFC championship game, play one good half and expect to get to the Super Bowl. I’m becoming more of Mark Sanchez fan as he matures, but I was truly impressed with him after following the story closely of his relationship with Aiden, the courageous boy who tragically lost his life to a horrific form or cancer. We all have the power to give back and make a difference which is truly what life is all about. We’ll get ’em next year, go White and Green!
*DISCLOSURE: John Darsie is long AAPL, MOS, FFIV, POT, LVS, MCP, JKS, GS. Scott Redler is long AAPL, AMZN, SHZ.
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