There are some green arrows around the World as markets try and “price in” the US government shutdown. As a market participant you sometimes need to think, what’s the hard trade vs. the obvious trade? Friday people were scared to be short over the weekend, and last night most were afraid to be long heading into the official shutdown. The news has arrived, so perhaps there could be some relief. I’m not saying yesterday is the low – futures are giving back their pre-market gains – but we have clearer sailing ahead. The market is built to prove people wrong, so you have to be on your toes in these situations.
The S&P hit a low of 1674 yesterday giving, us a new point of reference to trade against. This morning, S&P futures were up as much as eight handles, but have pulled in and now only indicate up three-hour handles. If we do get a gap up this morning, it will be interesting to see how it is treated. A constructive step for the bulls would be close above yesterday’s high of 1687ish. The next resistance after that is 1694, and then there is a big area at 1703-1707.
If this drags out all the way to the debt ceiling deadline on October 17th, I don’t think the market will continue to be so forgiving.
Lots of leading stocks still act well, and we need to see if that continues as we step into a new quarter.
In today’s Morning Call we will look at some retail names.
Ross Stores (ROST) was mentioned on our Price Point Sheet yesterday as it has been building a tight upper level base. The stock outperformed its peers in the last couple months. ROST has been hugging the 8-day MA on the rally up. A break and close above $73 could open the door for higher prices in the coming sessions.
L Brands (LTD) was also highlighted on the Price Point Sheet with an action buy area of $61.36. The stock did trigger this buy price but market weakness perhaps prevented a bigger move from taking place. The stock didn’t get much upside follow-through intraday, but it still closed well off of lows above the 8-day. The longer it holds above $60.20-60.50, the greater chances the we could get some upside momentum above yesterday’s high of $61.66.
The TJX Companies (TJX) has been hovering around its 8-day to digest the recent breakout at $54.80. The retail stock has an upper wedge pattern in place that could resolve to the upside above $56.60 on good volume.
Wal-Mart (WMT) has been under pressure and out-of-play since putting its top in during May. With a series of lower highs in place, $73.56 is micro support. Bigger support comes into play closer to $72.58. There is no real “active” play here.
Target (TGT) has also been a very weak big retailer, and is trading below all key moving averages. TGT ignited the bearish move on August 15th and still looks iffy. Some could be looking to buy the dip vs. the $62.79 level, but caution is still prudent here. TGT needs to clear $65.79 to look a little better.
JC Penney (JCP) has been a well-publicized disaster, but it could be trying to put in a bottom. There continues to be a lot of news circulating around JCP so take some care. The new pivot low is $8.59.
Lululemon (LULU) is trying to look a bit better. The stock absorbed its earnings down move quickly and is starting to repair its chart. LULU needs to get and stay above $75ish for a potential momentum trade into the gap. If it can’t break out yet, it needs to hold $71ish to stay in the game.
We will also continue to look at some high beta tech names for potential opportunity.
Facebook (FB) had a small Red Dog Reversal yesterday at $51.28 as the stock got a well-deserved rest. It’s still holding above the upper support of $49.50 despite 2.13% pull back yesterday. The next support level stands at the 8-day MA at $48.88, which could be a buyable spot. You could also potentially try to fade this up open for a cute short, but take care if that’s your approach with market leaders.
Tesla (TSLA) tacked on another 1.33% as the stock continued to get upside momentum since the igniting break out at $173.70. It does look a bit extended up here, in my opinion. Use yesterday’s high of $194.50 as the new pivot level to trade around. Overall, any dip has been buyable in this stock. The $200 level might come to a theatre near you, like we’ve talked about many times.
Baidu (BIDU) found support at the prior break out level of $148.25 and had a strong rally right off the open to get back to highs. The stock closed well off of lows to register a 0.61% gain. As long as it holds above the upper support of $150, we could see some continuation above $155.80. Some of these Chinese names remain strong. Also look at SINA, SOHU, SFUN.
Amazon (AMZN) continued to hover around the rising 8-day as the stock has been building an upper level base above $310. The longer it stays above this level, the higher the probability we could see it gets back in motion above $315. AMZN acts better than some other high beta tech names.
Google (GOOG) gave us a nice entry at Friday’s low of $871.31 as the stock opened below but pushed through this level to create a classic Red Dog Reversal. It closed well off of lows showing, some commitment to the bounce. Now it needs to break and close above the 50-day at $882 to prove itself, in my opinion.
Apple (AAPL) gapped down and hanging by a thread at the 50-day MA at $475. See how it handles this key moving average as dip buyers could step in. Use yesterday’s low of $474.41 as the new pivot to trade against. AAPL needs to get going, otherwise traders could start turning away from it.
Pandora (P) has been building an upper level base around its 8-day moving average as the stock responded well to the upper support of $24.50. A break above $25.50 with some authority could set it back in motion for additional gains.
eBay (EBAY) has a nice multi-month channel. At some point it could try and make a sustained move. As long as it stays above $54ish I do think it could get a move through $57 for a potential rally above $60 in the coming months.
Disclosure: Scott Redler is long GOOG, AAPL, Z.
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