Futures are now up big this morning after the ECB sprung a surprise with its decision to cut key interest rates. The decision came on the heels of a significant drop in inflation which got policy makers concerned about the economic recovery.
Yesterday was a very strange day in US markets with the Dow hitting new highs and many momentum tech names getting hit hard. We’ve had divergences from sector to sector at times, and they’ve lead to pauses or 4-6% corrections, but the macro trends have been very strong. Either you need very quick feet to create alpha or you just sit back and give room with a more macro plan.
If you haven’t heard, the Twitter IPO goes live today. The company announced this morning that it will price the IPO at $26 after strong demand in recent days. The deal values the company at $18 billion. Many point to the fact that Twitter currently loses money as reason for skepticism, but Twitter is going public while it is still in hyper-growth stage, whereas a stock like Facebook (FB) was slightly more mature at its IPO.
Will we see a LinkedIn (LNKD) type deal with no public pain and lots of opportunities on every time frame, or do we see a Facebook that beat up the retail market pretty bad before rebounding for big gains over the past three months.
We have the “art of the first day” to measure the supply and demand and figure out if we can get a 1-3 day trade. We also use the “art of the first day” to determine whether we should NOT be involved, which is a possibility with TWTR if they drive the opening print up too high.
In today’s Morning Call we will look at some other social names that might be impacted by how today’s transpires.
Facebook (FB), after doubling in the last three months, is trying to hold higher. It needs to hold above $47.50 to avoid additional selling pressure. It’s in a vulnerable spot.
LinkedIn (LNKD) has been forming a bear flag pattern after the potent sell off on earnings. The stock slipped 1.67% yesterday. A break below $218 could create a bit more downside as this has been a major winner over the long-term.
Yelp! (YELP) also had a sharp sell-off yesterday as the stock dropped more than 6% engulfing the 8- and 21-day EMA. That type of action could point to lower prices if it can’t retrace back above $70ish. Use $66.09 as your pivot.
Zynga (ZNGA) is still traveling in a weekly range since late September to digest the big rally off of August’s lows of $2.70. It needs to break above $4.05 to get going again and needs heavy volume to get interesting.
Mega Cap Tech had a nice move yesterday as some money seems to be flowing there.
Microsoft (MSFT) soared 4.20% to put in a new all-time high at $38.22 after Reuters reported the company had narrowed its CEO search to a handful of names. It has cleared all resistance levels and now holding above the gap at $37 could keep its pent up momentum intact.
Cisco (CSCO) also had a nice two-day move as the stock broke out of the lower level range on Tuesday and had nice follow-through yesterday. Use yesterday’s low of $23 as the new point of reference to trade against.
Oracle (ORCL) had a nice break out of the week-long bull flag pattern to register a 1.7% gain. A break above $34.34 could bring in more buyers for a potential move up to $35.30.
Intel (INTC) joined the rally with a nice reversal and logged almost a 1% gain. It broke and closed above the 8- and 21-day EMA. A break above the recent pivot high of $24.73 could get it going further.
Overall, though, high beta tech has been very choppy recently.
Apple (AAPL) needs to hold above $515 in order to stay intact.
Google (GOOG) needs to hold $995 to keep its composure.
Amazon (AMZN) would like to hold $334.
Baidu (BIDU) has been breaking down.
Tesla (TSLA) broke down hard yesterday after earnings as it was priced for perfection. The company had been handily topping estimates in recent quarters, and wasn’t able to deliver a blowout this time around. I think it could be in the penalty box for a bit.
Solar City (SCTY), Elon Musk’s other company, is also down around 8% this morning after earnings, following a 5% drop during yesterday’s session.
Disclosure: Scott Redler is long TGT, AAPL calls, NUAN calls, MNST calls. Short BBY, SPY puts, GOOG calls.