World markets are mixed as the stalemate continues in Washington. Overnight Chinese PMI’s hit a multi-month high, helping some Asian markets push higher, besides Japan being flat. Europe is basically flat and trying to hold in.
Last night the President warned Wall Street that they should be concerned about this current stand-off in Washington. I’m not sure it’s a great idea to basically say he wants the markets worried, perhaps he wants the market lower to help bring the two sides to a compromise.
Yesterday the market gapped lower but absorbed it pretty well. S&P futures are down 7-9 handles so it will be interesting to see if we can continue to build a floor above 1674-1680. If this level were to give way then you would have the 100-day and trend support at 1661ish. A trade and close above 1696ish could put the rally back on track for the fourth quarter.
When we started this new quarter we talked about the potential for some composure changes of the strongest stocks. Some institutional investors might have had a vested interest in holding these stocks higher into the end of Q3, and a few are starting to weaken.
Tesla (TSLA) got hit but saved on Tuesday, but didn’t have the same luck yesterday. The stock got downgraded yesterday and then a video of a burning car helped fuel some fear. Some were able to use high level stops and even get short at the 8-day around $185ish and then it came down into the 21-day at $176ish and bounced off it by the close. Today it’s opening near its multi-month trend line and the 21-day. The pivot to watch is $175.40. If you are coming in flat, I’d look to see if it can reclaim the $175.40 area and use the morning low as a stop, but if it doesn’t, be quick and get out of the way. This trade is vulnerable to a change of composure here for a bit. The 50day is a long way down at $158.76. TSLA has had a heck of a run.
Facebook (FB) is the other stock that has been on a tear since earnings. I’d be a bit careful here as well. You could use $49.45 as a high level stop and perhaps action area if you see relative weakness for a cute short. The next support area under that is $48.16. If it stays above this for a few more sessions perhaps the strength could continue.
We will go over additional high beta tech opportunities in the Morning Call.
Apple (AAPL) found support at the 8-day during the gap down, then the stock continued to build on its strength from Tuesday’s igniting move with another 0.31% gain. The next obstacle or potential add on buy could be around $491.80 then the next obstacle would be $496ish.
Google (GOOG) put in a wide engulfing bar yesterday after opening lower then reversing to the upside, and it closed on highs to erase all of the overnight losses. The trade is in motion as it could have room for a move back to prior pivot high of $906. This could be the go-to name if the market continues to hold up. Keep it on the radar and you could try to hold vs. $875, in my opinion.
Amazon (AMZN) gave back some profits yesterday but the stock is still holding above its 8-day. Use yesterday’s low of $317.50 as the new upper support level to trade against. Holding above this could add some power for a break above current resistance of $321.
LinkedIn (LNKD) has been holding up well in the last few sessions. Despite some choppy intra-day action, the stock looks like it could be poised to make a move higher above yesterday’s high of $253.56 where it could clear the downtrend resistance that has been in place since September 11.
Netflix (NFLX) opened lower and blasted off into new 2013 highs yesterday after clearing $320-$324. You could stick to that trend until it changes in my opinion.
Chinese high beta tech names continue to be very strong.
Baidu (BIDU) had a nice three-day rally after holding the prior breakout level of $147.50. Some rest might be needed, but overall the trend has been to the upside. Any recent dip has been buyable in this stock so far but it’s starting to get extended.
Sina (SINA) showed some relative strength yesterday as it was one of the first stocks to go green. SINA closed the day up 2.20%. The stock looks like it could be poised to see higher prices above yesterday’s high of $87.40. I still think there is more room and could be another tactic here.
Youku (YOKU) had a nice two-day move and broke out to new pivot highs yesterday with a 4.12% gain. Some work above the prior pivot high of $29.30 would be constructive to keep its momentum intact. Yesterday was the A+ set up, now it’s in motion.
Sohu (SOHU) also outperformed the market in the last few weeks and tacked on another 1.24% gain yesterday. It’s hard to chase after three days up, but you could look to buy the dip at around $77, in my opinion, if it sees a pull-back.
The ags continue to work on some lower-level base type patterns.
CF Industries (CF) looks best in breed. The $203ish level was the last action area to buy, now it looks like you could get another trade above $215ish.
Potash (POT) has been crushed, but that’s behind us. The consolidation continues with some volume bursts in it. The next clean trade could be to fill some more of the gap above $33-34.
Mosaic (MOS) is similar to POT – it’s been crushed but there could be some entry opportunities down here. A move above yesterday’s high of $45.72 could bring in buyers, then gap resistance comes into play at $47.10.
Metals continue their random violent action. The inconsistent movement keeps me away and I’m sure it’s driving people nuts that are trading it.
After yesterday’s strength, Gold (GLD) is lower this morning. It has a new lower pivot in place around $123.81 and is still trying to stick around. Yesterday’s high is $127.81, you could try to navigate it if you have any hair left.
This market is doing a solid job trying to absorb all the Washington dysfunction. I’m not sure how long it can hold up if this lasts all the way to the Debt Ceiling deadline on October 17th. Stock specific trades continue to work, but perhaps just do a little less.
Disclosure: Scott Redler is long AAPL, MS, ZNGA, MCP, XHB