World markets are again mixed this morning as Europe tries to stabilize after three down days ahead of Thursday’s ECB meeting. The Nikkei, which made six-year highs this week, fell 2.2% with some strength coming back to the Yen. The Shanghai Composite, however, continued with additional news on the liberation reforms of the Shanghai free trade zone.
US stock futures are up small ahead of the ADP employment report today, jobless claims tomorrow and the non-farm payrolls number Friday. We’ve had three consecutive down days since some sectors flashed Red Dog Reversals on Friday, showing signs of fatigue and that a rest could be on its way. Now we seen about a 25 handle move lower from the Friday highs of S&P 1813 to yesterday’s low of 1787.
The question is: was that the pullback or is it the start of something bigger after a tremendous equity move in 2013? At this point it’s December and yesterday’s low is our spot to trade against. Most macro investors won’t care if we pull back another 2-3% or go up 2-3% from here, but for those looking to generate alpha or P&L it makes a difference.
We will continue to try to isolate tradable situations with a plan in our Morning call, Off the Charts and Price Point Sheet for those who need to stay active into year-end.
In today’s sector spotlight we will look at some social media names.
Facebook (FB) broke above the downtrend resistance that has been in control since mid-October last Friday, then held above it on Monday and had a nice healthy inside day yesterday. The longer it holds above $46-46.20, the higher the probability it could get back above the 21-day at $47.30ish to regain some upside momentum.
Yelp! (YELP) is hovering around its 100-day as the stock has been finding some dip buyers at this key moving average. A break and close above yesterday’s high of $60.37 could bring in additional momentum for a move back to $64 area. Use $56.50 as key support.
Zynga (ZNGA) had a pull-back into the 21-day EMA. Use yesterday’s low of $4.07 as the new pivot to trade against, as the stock could see a bounce off this key moving average. The $4.05 level is the prior breakout level. Holding above this level could keep its momentum intact. It put in a small double top in at $4.55 last week.
Twitter (TWTR) found some support at $40.54 and showed relative strength yesterday as it logged a 1.45% gain. A break above Monday’s high of $42.00 could bring in some buyers.
LinkedIn (LNKD) doesn’t have much going on here. The stock has seen a tremendous move since breaking above $100 in February 2013 and now it’s been out of play and in a consolidation phase. LNKD needs to hold $208ish to continue to build. Not much action here.
High Beta tech continues to provide two-way opportunity.
Apple (AAPL) had a nice gap and go yesterday after some upgrades. The stock saw a nice push into the close to put in a new high at $566.38. Look for upside follow-through above this level into $572 resistance.
Google (GOOG) was a nice calculated trade for us last week then started to weaken Monday. If it wants to stay on the top of traders’ radars, it needs to hold the 8-day EMAaround 1049, More intermediate-term traders would want the 21-day to hold at 1031.
Amazon (AMZN) just had a two-day pull back into its 8-day EMA. Use yesterday’s low of $383 as the new point of reference to trade against as the stock could see a potential Red Dog Reversal through this pivot after pulling back 16 points off of highs. I tried shorting it Monday and lost money, shows how I need work from the short side.
Netflix (NFLX) is also resting above its 8-day EMA but found some support at this key moving average, which is constructive. A break above the current pivot high of $368 could set it back in motion.
Tesla (TSLA) had a tremendous move yesterday as the stock gained 16.5%. It’s hard to chase after a big up day, as it has some resistance at $145 area. See how it handles this pivot level. Some work above $135-140 would be healthy.
Baidu (BIDU) tried to break out yesterday but didn’t have the power. It has a decent chart pattern and needs to hold $163-$165 to stay on our radar to try again over $170.
Some solars are trying to tighten up for perhaps a tactical new move higher.
Canadian Solar (CSIQ) is also starting to look better as the stock had a nice reversal at $28.57 after a few days of rest yesterday. A break and close above the 8-day EMA at $29.58 could bring in more buyers.
Solar City (SCTY) has a tight pattern as the stock has been basing above its 8- and 21-day EMA and forming a bull flag pattern. A break above $53 could help it clear the downtrend resistance that has been in place since 11/4 for some upside momentum.
First Solar (FSLR) needs to get above $60.50ish on volume to get some momentum back as this pattern is tightening up.
Metals continue to show weakness. Recently GLD broke below $121.71 then $119 and now it’s on its way to perhaps test the 2013 June lows of $114.65, and then perhaps new lows.
This is a tricky spot in the market as after three down days. For most of 2013 the market picks back up and makes new highs. I think you remain tactical as some set-ups continue to show their face for “things to do” as we try to figure out what’s next.
Disclosure: Scott Redler is long AAPL, FB, BAC, GS, MCP, TWTR. Short SPY.