Sometimes you need an outside event to show you the true “nature of the market”. Same way when Japan crisis hit, we used technical techniques to uncover the leading groups. The groups to buy first when the market started to rally. A day like yesterday shows us that we are overbought. (I thought we were overbought on Friday. Yesterday’s open was a gift to sell some longs.) In my morning note yesterday I mentioned to start shorting the SPDR S&P 500 ETF (SPY) to help hedge against a lot of longs, and this morning it’s paying off.
Today the S&P’s are giving some nice downside to yesterday’s reversal. I will cover my spy around $135-135.50 range and take the trade, then look to see if I can BUY THE DIP! 1348-1352 is some decent support, but I’d rather buy around 1340-1344 which would be the proper retest of the neckline that was my last momentum buy. I do see some big levels in key stocks to watch. This will help us figure out what type of pause/correction we might get over the next few sessions.
Watch the T3Live.com Morning Call below with Scott Redler and Alix Steel.
Tech
Apple Inc. (AAPL) I thought that Apple would be primed to go higher after getting Nasdaq rebalancing out of the way, but there seems to be some more persistent weakness under the hood. AAPL must hold $341-342 otherwise there could be even more aggressive downside action. The trade never really triggered above $352-355 that was the entry for momentum, and sometimes trying to be early can cost you.
Baidu.com, Inc. (BIDU) is in trouble if it doesn’t hold $146-146.50. The stock has not been acting great since earnings. Where are opening in that crucial area this morning, and you can use that area as a stop or possible short entry. Definitely a leading shorting candidate.
Two of the main cloud names I watch, VMWare, Inc. (VMW) and salesforce.com, inc. (CRM) are acting very sloppy and I got stopped out of longs yesterday. I will re-visit these as buy the dip candidates at another time.
Another Chinese Internet stock, SINA Corporation (SINA) has been trading well for both longs and shorts, and at this point if you’re still holding longs- I would just reduce your position.
Finally, Sohu.com Inc. (SOHU) is acting very sloppy so I’m avoiding for now besides quick trades.
The Oil Service HOLDRs ETF (OIH) was one of my biggest losers yesterday, the result of trying to be “cute” with a catch-up type play instead of focusing on leading stocks. The oil service group has been trying to regroup after a nice move last month, and the fact that they could not hold their moving averages yesterday shows significant technical damage. I got stopped out at $158, we now have a lower high in place, and it seems a little like a Head and Shoulders Top is building. Schlumberger Limited (SLB) and Diamond Offshore Drilling, Inc. (DO) are two unhealthy stocks in this sector.
Apparel stocks have also been losing momentum, getting exhausted after long runs.
Lululemon Athletica, inc. (LULU) broke below its upper level consolidation and can see some lower prices. Abercrombie & Fitch Co. (ANF), Polo Ralph Lauren Corporation (RL) and most notably Under Armour, Inc. (UA) are also losing steam, the latter after a mediocre earnings report.
Silver has been a frustrating trade for those trying to short a relentless parabolic move, but yesterday was the best short entry to date on the iShares Silver Trust ETF (SLV). I came in overnight short very small size from last week, then shorted through levels yesterday afternoon after a morning bounce. I’m covering some of that short here around $42.80 after some overnight follow through, and I will likely cover the rest of my shorts after the open. I will see if I can buy for a bounce around the 21 day that stays $41.88.
Gold did a RedDog Reversal, traded through Friday’s high and came back below. I sold my GLD that I’ve been holding since $131, at around $153. Some quick traders used that strategy to get short vs. yesterday’s high after it triggered and made some money. I will try and buy back around $148-149 in the SPDR Gold Trust ETF (GLD).
The banks have been off my radar, but with some weakness coming into the market I took a peek at them for some possible downside. If Goldman Sachs Group Inc. (GS) breaks the $150.50-151 level, you can see some trouble here and some more pressure on the banks.
Again, in the S&P 1340-1344 I will be a big level that I will look to see if we can BUY THE DIP. I do think we go higher this year, but you need the right entries and exits to stay with the trade. Remember, we don’t buy excitement, we sell it.
*DISCLOSURE: Scott Redler is Long AAPL,. Short SLV, SPY
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