Futures are basically flat this morning as world markets are a bit mixed. The Nikkei is a highlight as it’s at seven-week highs. Yesterday the indices held higher with some slow stock-specific action.
The gap from last Wednesday remains intact as we digest above it, and each day the index has made a higher low. Yesterday’s low was 1677. We still haven’t dealt with the May 22nd intraday high of 1687, but I think that could come soon. Yesterday we outlined the scenarios for how we handle those all-time highs, and I think they bear repeating:
The 1687 intraday high is a spot that everyone will have to make some adjustments. We’ve had these types of pivots many times this year in the S&P: 1474, 1530, 1576, 1598 and then 1635. How the market handles these areas helps us measure intermediate-term direction.
Scenario #1: Do we get to 1687ish and then come off so Bears try to call a “double top?”
Scenario #2: Push through 1687 and squeeze shorts that have been rolling them up, induce new money flows and then close back below creating a “outside day” or “Red Dog reversal” which then usually leads to rest.
Scenario #3: We pushed through and closed above 1687 with some power. Shorts cover or roll up, new money comes in and the pain trade continues up to 1700+.
The biotech sector continues to perk up.
Celgene (CELG) saw a big gap up on Thursday on positive test results from cancer treatment and hit all-time high at $136.36. The stock then saw a nice two-day consolidation as it held above the gap up. It also held above the prior pivot high showing some commitment. The longer it holds above the gap at $131.67, the higher probability we could see the next break out above current high of $136.36. The stock closed well off of lows yesterday, keep this name on your radar as the breakout could happen soon.
Acadia (ACAD) rested for two weeks to allow the 8-day moving average to play catch up. Yesterday it finally broke out of the mid-level base to take out the prior high of $20.09 and put in a new all-time high at $20.43. It was a nice Day 1 move, and the stock closed on highs signaling potential upside follow-through today. The last time it saw a break out at $14.80, it saw three big up days after that. ACAD still has high short interest of 18%. The longer it hovers around the new highs, the greater the chances we could see another round of a short squeeze.
Gilead (GILD) saw a nice snap back to make a V-bottom on the daily chart, which is typically a bullish pattern. It has some resistance at $58 level, a break and close above this could bring in more buyers. GILD has a strong chart, and the last pull-back was healthy and constructive as it found support at the 100-day.
Sarepta (SRPT) has a strong pattern on the daily chart, with intermediate uptrend support in place since September 2012. It also has an accelerated uptrend that was formed starting on April 30. SRPT has been pushing higher into a major resistance level at $45 and looks poised to potentially take out this level. A move through $45 on good volume could bring in some momentum.
Virtex (VRTX) is another break out candidate in the biotech group, as it saw a huge gap up on April 19. It did fill a portion of the gap but found support at its 50-day and held the top 1/3 of the gap. The stock just had a couple potent days up and saw a healthy digestion candle yesterday. It has a nice set-up for a break out move above $88.
Below are a few stocks that have earnings after the close today and tomorrow that we will be watching closely.
Yahoo! (YHOO) reports after the close today. This has been a “go-to stock” this year from my 2013 thesis. It’s priced for a perfect report now, and I think would need a healthy beat to ignite higher.
eBay (EBAY) reports after the close on Wednesday. This stock is near 2013 highs, but it’s been very erratic. I believe it also needs to surpass expectations in order to get and stay above $57-58ish.
International Business Machines (IBM) reports after the close on Wednesday. The stock is in the bottom of the recent range. I think expectations are lower for this one, but if it beats at all I think it could move higher. The $188-190 level is important support.
Intel (INTC) also has lower expectations going into this report compared to the last one. A small beat could rally it.
MGM Resorts (MGM) saw a snap back after quickly reclaiming its 100-day on June 25. After a few periods of rest to digest the big move, it saw another potent move up yesterday. MGM closed on highs showing relative strength. The $15.95 level is the major resistance spot on the weekly chart. A break and close above this could bring in more buyers. Active traders could look for momentum at this action area.
Tesla (TSLA) gapped up at the open as the stock joined Nasdaq 100, but failed to hold the overnight gains and traded back below Friday’s high to create a Red Dog Reversal at $129.94. It went as low as $126.82. The stock closed on lows showing relative weakness for the first time in a while. If it doesn’t meet buyers at yesterday’s low of $126.82, we could see a further pull-back into the first support level at the 8-day.
First Republic Bank (FRC) is one of several regional banks that have been showing lots of relative strength. Other strong regionals include ZION, STT and STI. We have another breakout candidate in FRC as the stock has been consolidating at upper level since April and looks poised for a potential break above the current resistance of $40.30.
Macy’s (M) broke out of the downtrend resistance on Monday, then retested this trend line on Wednesday and held. It’s now flagging nicely above its 8-day and looks poised to challenge micro resistance of $50.77 to potentially make another leg higher.
It still irks me a bit when people out there continue to ask me if “this rally is for real.” All-time highs are as real as it gets. They must have missed it or are short. Time to work on that process.
Disclosure: Scott Redler is long MGM FB BAC KNDI AIG KNDI Calls. Short SPY