The Bears Better Play Some Defense

By: Scott Redler

The Bulls marched the ball right down the field and into field goal range. In yesterday’s note, that was the 1,098-1,102 zone. The Bears better call up Buddy Ryan and that 46 defense in order to step it up and not let the Bulls march into the Red Zone–the 1,113-1,120 area.

We just finished a highly telegraphed two-day bounce off of very oversold conditions. That was the “easy money.” Now it gets a little trickier, as the market has hit small resistance. At this point it’s worth taking some longs off the table, BUT this is not a compelling area to initiate major shorts just yet. That could come with the employment data on Friday.

The Rundown:

• Commodities, which had been hit the most, bounced the best. Gold had a nice move back above $1,100. Oil’s two day move was quick and easy.

• Freeport McMoran (FCX)–another nice two-day bounce. It still has room to run, but we sold half of our longs yesterday. No short just yet.

• U.S. Steel (X)–this too has room to run. We also sold some yesterday and will wait to short.

• Tech lagged this two day move. Google (GOOG) did not bounce at all. Watch the $525 area as very important support. If that breaks, we could quickly see $500.

• Amazon (AMZN)–this chart is technically broken; however, it did hold Monday’s low. It could be worth some quick trades in this area. A trade above $119 could take it to the $122-124 area, but it is not a compelling setup.

• Baidu (BIDU) is holding up pretty well. I had it as a buy through $430 today, but Goldman Sachs (GS) upgraded the stock this morning and took away the trade. There still is room to the $440-444 zone.

• Research in Motion (RIMM) was a nice long for us since the reversal on January 26th. Yesterday it broke its descending channel. I would buy dips from here.

• Apple (AAPL) did not bounce much. It’s in a very tight range for now and needs some time to develop a new pattern. Resistance sits in the $198-200.50 area and support in the $190-193 zone. See if this range gets resolved and watch price action as it breaks.

Three stocks that gapped up on strong earnings and held in well are worth keeping on the radar for higher prices:

• Intuitive Surgical (ISRG) above $336-339.

• Cree (CREE) above $60 could see old highs

• VMWare (VMW) above $46 has some room.

• I am not expecting breakouts right now, BUT these will make new highs at some point this year.

The banks bounced back well yesterday:

• Goldman Sachs was a nice long for us. We are taking profits in the $157-163 area and are looking to short in the $159-163 zone.

• With JP Morgan (JPM) we will be taking profits into the $41 area and will look for a short in the $41.50-42.50 region. With this one, we really had to fight to buy the right prices.