Don’t Chase as Market Hits Resistance Zone

The market is drifting higher in Monday’s session after a large gap up to kick off the week. Fears regarding the Japan nuclear crisis appear to be dissipating, and attacks by coalition forces in Libya are appearing to be cheered by the market. From a trader’s perspective, these large gap ups have been very frustrating. Last week the market gapped up Thursday and Friday, and tech acted very poorly during the sessions. Today, tech is actually acting a bit better and the market is not letting out the trapped shorts.

The S&P 500 tagged the 1300 level this morning, taking back around 50% of the down move (from 1344 down to 1250), but most of the action happened overnight. The active investor who bought below around 1255-1265 is being rewarded, but the professional trader is seeing way to many
divergences to sink their teeth into the market.

As far as tech leaders go, Amazon.com, Inc. (AMZN), Google, Inc. (GOOG), Apple, Inc. (AAPL) are all up strong from lower support. Baidu.com, Inc. (BIDU) took off on the open and is still above the moving averages. Priceline.com incorporated (PCLN) tested the 50-day moving average and held. With a brief flush right off the open, the market gave traders an opportunity to get out of some short they may have taken overnight.

Some cloud computing stocks are trying to get footing. EMC Corporation (EMC) has been especially strong today after being upgraded at Goldman Sachs to conviction buy with a price target of $33. EMC is a leading player in the storage space, and also owns a majority stake in virtualization leader VMWare, Inc. (VMW). Fiber optic networking stocks like JDS Uniphase Corporation (JDSU) and Finisar Corpoartion (FNSR) are having a decent day for those looking for a scalp long vs. Friday’s low, but in the longer term this group is broken after FNSR’s disappointing earnings report.

The banks were strong Friday after it was announced they would be allowed to re-instate dividends. The banks are a bit weaker today, and Friday’s pop could have been a flash in the pan for a weak sector. At best, these stocks need to digest now, which they are doing after an up open. Gold and silver are holding up pretty well, but if you weren’t holding through the weekend it would not be prudent to add in this area.

Bold swing traders who took positions through the weekend with all of the explosive headlines out there were rewarded, and caution should once again be the prevailing sentiment. Executing a technical trading plan in a headline driven tape is nearly impossible, as one statement from an unnamed official can send stocks plummeting. However, the path of least resistance for the market right still seems to be higher, so we will watching closely for relatively strong stocks that show sings they could have further upside.

Disclosure: Scott Redler is long GLD, JDSU, NYX, BAC, F, YOKU

About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

Visit: T3Live

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