The market refused to succumb to the pressure despite three pre-market drops this week, and raced back to new highs Friday as investors seemingly aim to position themselves long ahead of the standard Monday morning gap up. Stocks continued to shrug off escalating protests in Egypt all week, and when President Hosni Mubarak finally stepped down today his ouster was cheered by the market as well as jubilant Egyptians in Tahrir Square.
Today we saw potent moves from several different sectors and types of stocks. Netflix, Inc. (NFLX) continues to be the strongest stock in the market as it leads a media revolution. The legion of shorts is dwindling as notorious NFLX short seller Whitney Tilson today outlined the reasons why he is covering his ill-conceived position. Improving margins and growing customer satisfaction were among the reasons mentioned for the about-face by Tilson, who’s bearish stance on NFLX generated an open letter from CEO Reed Hastings, who warned “Cover Your Short Position. Now.”
Momo Mania
Several other momentum stocks continued to extend higher after recent runs. Apparel makers Under Armour, Inc. (UA) and Lululemon Athletica, inc. (LULU) have hardly taken a breather over the past couple weeks. Investors have piled into Baidu.com, Inc. (BIDU) following an outstanding quarter from the Chinese search engine, with the stock adding 3% more today. OpenTable, Inc. (OPEN) has also had a strong two day run at the end of the week. In the cloud computing sector, Rackspace Hosting, Inc. (RAX), a favorite in the group that I have continued to hold and added to on the FFIV debacle day, exploded higher after a stellar quarter, with management proudly proclaiming they are now too big to be considered a takeover target.
One stock that had been flying under the radar a bit over the last few months has been Google Inc. (GOOG). Today the stock came back on our radar as it approached the upper trendline of a recent wedge pattern. The stock extended nicely higher through that level today and now has little in its way technically before making it back to highs.
Ags Continue to Sprout
Agricultural stocks also continue to lead the market, with my two favorites in the group PotashCorp./Saskatchewan (POT), which has a stock split coming later this month, and The Mosaic Company (MOS) extending once again above highs. The group has been trading great technically and has a strong fundamental investing story for the foreseeable future. The world population is growing rapidly, and along with it the affluence of that population as emerging markets develop. More people eating higher on the food chain requires significant more farming, while at the same time arable land is decreasing. That’s where potash and phosphate fertilizers come in.
JPM Finally Breaks Out
In the banking sector JP Morgan Chase & Co. (JPM) also had a nice breakout today after basing in a tight range over the last month and a half. Jamie Dimon’s bank looks to be quickly become the best trading stock in the sector, while we do expect Goldman Sachs Group Inc. (GS) to make it back to highs in the coming months.
Wynn Flexes Muscles as Strongest Casino
The casinos have become a very mixed bag, with the group not trading together at all Friday. We have been bullish on the casinos and expected strong earnings from Las Vegas Sands Corp (LVS), but it disappointed with its Q4 numbers. I swapped it out with Wynn Resorts Limited (WYNN) after that report, and that turned out to be an inspired decision after today’s events. WYNN broke out with ferocity today after a stellar earnings report, and has widened its lead as the clear cut best in the sector. LVS had a small bounce today, while group laggard MGM Resorts International was down.
—
Overall, this market continues to show amazing strength and resiliency. Every time shallow support was tested, buyers swooped in to push stocks higher. In many cases, buy the dip has become buy the rip, as momentum traders are jumping in for higher level extensions. Conspiracy theorists say the market is scripted, that Fed Chairman Bernanke is in cahoots with big market players to drive stocks higher, and that one day this will all in badly. We choose to simply let the price action do the talking. Buying all dips works until it doesn’t, and for now, there are no signs that the market has any intention of letting up.
*DISCLOSURE: John is long POT, MOS, RAX, WYNN, JPM, GS, BIDU, GOOG. Scott is long LVS, GOOG, JPM, MGM; Short SPY.
This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by T3 LIVE or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. Visit the T3Live Homepage, Virtual Trading Floor, and Learn More About Us.
