World markets and US futures were pretty quiet overnight as we head into the two-day Fed meeting. The Shanghai Index was a stand out to the downside, dropping 2%.
Bears have been coming out all year at each pause in the market to “nay-say” this rally> It’s amazing that they are already coming back out calling for a “double top.” Not all gaps hold and yesterday’s didn’t create a “gap and go,” but we’ve seen this type of action before. For right now it’s just something to keep an eye on.
The Thesis for much of 2013 has been “gap and nap,” meaning it’s not the easiest to find intraday movement.” Much of the movement in stocks has come overnight. Holding multiple positions over a longer time-frame has worked best this year.
As of now, yesterday’s candle looks a bit different than the gap up day for September 10th, but it’s not extreme. Gap support stands at $170.04 with the 8-day down at $168.47 (which we are extended from). If this area doesn’t hold then we would need to make some adjustments to short-term positions. The pivot resistance area is $170.97-171.24.
In today’s Morning Call we will start with the banks.
GS was highlighted on our Virtual Trading Floor, Off the Charts and Morning Call as one that could see continuation after holding Tuesday’s gap up. The bank tacked on another 1.85% to soar back to highs. Holding above yesterday’s gap support of $165.19 would keep its momentum intact.
MS acted best in this group as the bank had a nice rally since August 28th lows. The gap and go yesterday lifted the bank up to see new highs at $29 before having a small pull-in. Overall, the chart looks good, but on a short-term basis it’s a bit extended. Some digestion above $28 would be healthy.
JPM erased most of the losses from last Thursday’s potent down move and closed back above its 100-day MA. It has some room to the 50-day at $54. A break and close above that could bring in more buyers.
BAC held its 8- and 21-day MA on the pull back last week, showing commitment to the upside. The stock managed to finish in positive territory with a 0.28% gain and close above all key moving averages. It looks poised to potentially make a move higher above $14.68.
We will also look at the solar names that are trying to wake up.
SCTY is currently building a bull flag above the 21-day MA that could resolve to the upside with a move above $37. The stock broke out of a lower-level range last week and was a focus in the T3 Live Virtual Trading Floor.
JKS had a nice move up on September 3rd as it broke above resistance of $15.88. The stock has been building a nice upper-level base above its 8- and 21-day MA since. It took a break yesterday but managed to close above the 8-day at $18.45. Use yesterday’s low as the new pivot to trade around as holding above this could set JKS back in motion for higher prices.
CSIQ has been basing above the 8-day for more than two weeks. A break above $14.60 on good volume could lead to a retest of the current all-time high of $16.40.
FSLR has been lagging but it tried to perk up a bit in the last few weeks. The stock has continued to find support along its 200-day. Keep this on the radar for a potential catch-up play if it could get above $40.40. Above that we have the gap from Aug 7th at $42.25
Quick hits:
AAPL hasn’t found a friend since its product event as it shed another 3.18% yesterday to briefly breach its 100-day moving average at $449ish yesterday. The next important level stands at $441-445 from the prior breakout in July. See how it handles this level as it could be a buyable spot for a quick bounce. This trade changed for me on event day when it broke $503.50.
TSLA was one of the first stocks to show relative strength yesterday, but faded all the way back to close on lows of 166ish. The stock still managed to close above its 8-day and the longer it holds above the upper support level of $165-166, the higher the probability we could see some upside momentum above yesterday’s high of $170.85. Momentum does seem to be leaking out though, and there are stories this morning about a more formidable competitor in the electric car space from Chevrolet. The WSJ is reporting Chevy is working on a $30,000 electric car with a 200 mile range, which would undercut the more expensive $70,000+ Tesla Model S.
FB got people giddy on September 12th, which is often the best time to sell, especially when it opens up and closes on lows. Yesterday it sliced down through its 8-day MA, something it hasn’t done in a while. I will look for potential opportunities around the 21-day at $41.49 or with some type of Red Dog Reversal through $42.43 if it presents itself.
LNKD has been a bit weaker lately after the September 12th bearish candle. Yesterday it also closed below its 8-day MA. Watch the 21-day MA down at $242. LNKD hasn’t’ been below the 21-day since June so let’s measure that area for composure/opportunity today.
GLD slipped another 1% yesterday to close on lows of $126.33. It’s hard to press short after a big down move from $137.55, but it’s also tricky to get involved on the long side as it’s trading below all key moving averages and the downtrend bias is still in control. Next major support is $123.55 from August 6th lows.
TBT rallied all day to fill the overnight gap down and gain 1.37% yesterday. The ETF is back above all key moving averages showing buying interest. Next resistance stands at $81.85.
The current consensus seems to be for a $5 billion reduction in the pace of purchase of QE in tomorrow’s much-anticipated rate decision, which would basically amount to a “token taper.” I think it could be closer to $10-12 billion, but I trade off price action, not opinions. I think the action could be a bit quiet and choppy until Wednesday’s announcement.
Disclosure: Scott Redler is long BAC, GS, SCTY, BBRY calls. Short SPY.
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