Some red arrows around the World as they pull off multi-year or all- time highs. Right now it’s just some profit-taking as we did get some “cautionary candlesticks.” It never hurts to sell some strength and use some high level stops so you can always take advantage if “risk happens.”
Yesterday our markets started off above SPX 1800 and then later in the day rolled over with New York Fed President Dudley’s comments and perhaps Carl Icahn’s cautionary statements. Whatever the reason, the S&P is up over 25% for the year, so some choppy action is natural.
A day like yesterday always has me clean up some loose longs to see what’s next. At times like these you measure your time frame and commitment. The Bears are growling today, so let’s see if they can even press us below yesterday’s low of 1788 and close below it. The 8-day EMA is 1781 and the prior high, which could be a battleground if we see it, stands around 1775ish.
The trade did change a bit yesterday as many stocks that looked like they could be ready to break out, tried and failed. Now we need to see how they hold up. Will they try again in the next couple sessions or will it lead to more downside?
High beta techs showed some faulty action.
Netflix (NFLX) failed to get some follow-through from last week’s rally as the stock met some sellers right off the open to retrace 2.3%. The damage was contained, though, at the 8-day EMA at $339.50. Use this as the new pivot point to trade around. A break below it could lead to a retest of the 21-day EMA at $332.84.
LinkedIn (LNKD) also retraced almost 4% to retest the 8-day EMA at $221 yesterday. The stock filled the gap from Friday to the downside and the next support level to watch is $215-217.50. Below that we have $208. The Barron’s article seemed to hit this sector hard.
Facebook (FB) give back all of its recent gains. In the morning we mentioned the idea of using $48 as a high level stop and it sliced through it, slipping 6.5% to break below both the 8- and 21-day EMA. It’s hanging by a thread at $45.80. A break below this could lead to additional selling pressure. The H&S pattern is now very apparent.
Twitter (TWTR) also got hit and needs time before building a more defined pattern. Recent support sits at $39.40-41 – if that breaks it would create a new pivot.
Apple (AAPL) broke below its 8-day EMA to retest the next level, the 21-day EMA at $518.20. If it can’t find a buyer at this key moving average, next support comes in at $512. My stops were at $523. Now it moves from the A list down to the B list unless it snaps back quick.
Google (GOOG) put in a big topping tail after touching a new high at $1048.74 which could be a sign to take caution. High level support sits at the 8-day EMA at $1026. Below that we have the prior breakout level of $1018. Yesterday I came in long it, sold some strength and got stopped out around the prior high of 1041. Now I wait…
Tesla (TSLA) changed its complexion heading into earnings, then after became very heavy as it broke its 100-day around $153. The sell-off then intensified yesterday below the $132.50 pivot. If you didn’t get caught or chase, and used high level stops, at some point we could get a “tradable entry” near 200-day EMA around $107-117. It’s down another 3-4% this morning as the government announced a probe into recent fires on the Tesla Model S. If you’re going to get involve, I’d trade it a level vs. a level with very right risk management.
3-D Systems (DDD) and Stratasys (SSYS), the leaders in the 3-D printing group, put in topping type tails that could lead to a rest or corrective activity. For DDD use $78.25 as the pivot and yesterday’s low as a spot on the rest of this group: SSYS, XONE, VJET.
Banks need some time as they had a super run last week, stretched higher yesterday and then came off the highs. Now we need to see time and consolidation.
The Financial Sector ETF (XLF) has a low at $21.07 and below that is the 8-day at $20.93, a spot to watch for a potential dip buying opportunity.
Bank of America (BAC) it went from $13.83 to $15.17 and now could use a rest. Use yesterday’s low 14.86 as a pivot, if this stock wants to hold in $14.60 should provide valid support.
It goes the same for most sectors. They closed well off yesterday’s highs, so use yesterday’s lows as a pivot, then the 8 or 21-day EMA as support areas to map out.
Whenever the market shows any weakness, a chorus of Bears seem to start calling for a crash. We will keep a level head and take it in stride, measuring complexion at each support level. The most significant area to watch is 1775 – if we get a close below that level quickly, perhaps we could get a break out failure that leads to something more meaningful.
Disclosure: Scott Redler is long BAC. SHORT SPY, ICLD.