Digestion Needed After Thanksgiving Feast

World markets are mixed this morning after a very quiet holiday weekend. Stocks had a tremendous move the past two weeks and could use some digestion before Santa tries to ring the bells for one last 2013 move (or did Thanksgiving steal some of the Christmas thunder?).

Either way, it’s been a great year on all time-frames and if you follow intermediate-term trends and set-ups, last Monday was a bit more exciting than this one as most of our tech names were tight and set up for tactical swing trades. Today we come in and most of them are extended.

On Friday most sectors did somewhat of a Red Dog Reversal, where they opened up and traded below the prior high, which could lead to a rest. SPY put a high in on Friday at $181.75 and closed below $181.20, giving some a reason to book some gains. If the sellers want a bit more of downside, they need to keep it below $180.80. I Do NOT think we fall apart, but a test of the 8-day at $180.30 would be healthy. A close below $179.70ish this week could create some volatility, so we shall see. The 21day is at $178.53.

To kick off the month, in the Morning Call we will check the temperature of the sectors:

The Nasdaq ETF (QQQ) added another 0.6% to its recent rally on Friday. It’s now a bit stretched from the short-term moving averages and some digestion above the 8-day EMA at $84.45 would be healthy.

The small cap Russell 2000 ETF (IWM) also enjoyed a nice rally on Friday. The ETF put in a new high at $114.16 before seeing some profit-taking to close on lows. It could be a minor signal that this group needs at least a short rest. Upper support stands at the 8-day EMA at $112.14.

The Financial Sector ETF (XLF) might also need a break as the ETF retraced 0.37% on Friday to close on lows. Look for potential support at the 8-day EMA at $21.39. Below that we have the breakout level at $21.25 as the next significant support to watch.

The Homebuilders ETF (XHB) has enjoyed a nice breakout to clear the intermediate downtrend resistance that has been in control since May last week. The ETF had a big outside day on Friday showing some faulty action. It needs to hold above the trend line at $31.65 to keep active traders interested.

The Biotech ETF (IBB) continues its grind higher as it added another 0.37% on Friday. Holding above the upper floor of $220-221 to allow the short-term moving averages to play catch up would be constructive for higher prices.

The Retail ETF (RTH) also closed on the lows Friday as Black Friday sales numbers came in a little bit light. This has been a strong sector and the 8-day sits at $60.57.

The Energy ETF (XLE) has been a weaker sector trading below most moving averages and not very interesting for short-term action, but if we retrace a bit more, this could see the 50-day at $85.55.

Great week for most high beta tech names last week as they provided great set-ups for the holiday shortened week.

Apple (AAPL) tacked on another 1.85% on Friday to cap off a powerful three-day rally. The stock has reached our target of $550-555 from the Off The Charts newsletter.

Google (GOOG) saw some consolidation on Friday after a three-day rally to new highs. Upper support stands at $1053. Below that we have the previous breakout level of $1042 as the next significant support to watch.

Tesla (TSLA) had a nice reversal on Tuesday and Wednesday last week to reclaim its 8-day EMA. Holding above this key moving average at $125.90ish would confirm the validity of its rally.

Facebook (FB) gained another 1.12% on Friday to break above the down trend resistance that has been in control since mid October. A break and close above the 21-day at $47.38 could trigger additional momentum.

Amazon (AMZN) has been flexing its muscles since clearing the prior highs of $373ish. It’s been up for about seven days since so it’s hard to chase here, but doesn’t mean it’s an easy short. If you are still long, congrats, and I would trim and trail. If you are looking for a cute short, make sure to do a level vs. a level.

Netflix (NFLX) gave some decent entries last week as well. The $350ish level was the last potential pivot buy and now it’s a bit extended. The stock hit $367.80 on Friday, now it’s hard to buy and hard to short.

Twitter (TWTR) is not very interesting. Most underwriters initiated ratings today and all had different things to say. Goldman Sachs (GS), which was the lead underwriter, was one of the few to upgrade it. TWTR did stage a reversal after hitting $38.80, but I’m not sure how much upside it can have yet. There is a resistance point at $42.49 then $44ish.

Some breakout candidates on our radar:

Microsoft (MSFT) had a nice gap and go on Friday to log a 1.41% gain. A break and close above $38.30 on good volume could help it break out of the weekly upper-level range.

Alexion (ALXN) also had a tight pattern as the stock has been basing above its 21-day EMA for two weeks. It had a nice move up on Friday, which could be Day 1 of a potential rally. Look for potential upside follow-through above Friday’s high of $124.80. A break above $126.39 would mark a new high.

Regeneron (REGN) is another biotech stock that has a good looking pattern. The stock has been pushing into the upper end of its monthly descending channel and looks poised to potentially break above this resistance trend line. A break and close above $297 could bring in some upside momentum.

Visa (V) has been inching higher into the prior pivot high of $205.25. A break and close above this level on good volume could lead to additional gains.

Final thoughts:

Metals look lower today as this trend for 2013 has been very strong to the downside. GLD has some support at $119 – if we get a close below this, we could see the June lows at $115ish.

The 2x Inverse Bond ETF (TBT) is trying to hold above $75.60ish but it’s very sloppy.

I did take down some risk Friday and am not very excited about today. I’d like to see some consolidation for new sets-ups into Christmas. Don’t push it if November and 2013 has been good to you.

This is deemed as one of the last “busy” or “full” weeks on Wall Street as we have a lot of economic data and the jobs report Friday. Unfortunately we will also have to hear about budget talks that could have a deal on the 12th or 13th, then most start doing less for the holiday.

Disclosure: Scott Redler is long C, FB, MCP, BAC, ZNGA. Short SPY.

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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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