There are some red arrows around the world as Europe and Asia get some downside follow-through after yesterday’s weakness in US markets. We’ve seen some upper support levels break but macro equity levels are far from broken.
Yesterday we got some of the most aggressive selling since early October. If you are an active trader, intraday yesterday you had two adjustment areas if you are a very active trader: the 8- & 21-day moving averages. Those EMAs served as spots to reduce risk and even get short if you were looking for signals.
This morning S&P futures are down 1-3 handles and in my opinion could provide tactical opportunities (maybe even a swing pivot). These are the types of moments when the Red Dog Reversal can be your perfect set-up. Use yesterday’s low as your pivot in whatever stock or ETF you’re trading. Below it, there could be money from the short side or an avoid from the long side as we don’t know what kind of downside we shall see. However, a break below and then a move back above could be a tactical long with the morning low as your stop. That’s Red Dog Reversal 101.
If you use the SPY as an example we have support at the prior breakout of $177.60ish. If that holds this
morning and SPY comes back above yesterday’s low of $178.50 you could buy with that morning low as a stop and then measure the type of bounce.
This same strategy could be used in XLF, XHB, IWM, XLI, QQQ, etc.
A few events to watch today: Jobless claims, retail sales, import & export prices, business inventories, quarterly services survey, natural gas inventories, 30-year bond auction; Earnings from Lululemon (LULU), Adobe Systems (ADBE).
Social media stocks took a break yesterday after flying high recently, but last night’s news that Facebook (FB) will be added to the S&P 500 is giving the group a boost this morning.
Facebook (FB) had a 1.71% pull-in yestertday to give back most of its gains from Tuesday’s breakout move, but this morning is opening up 3.6% and above the high from this week. The next pivot resistance to watch is %52.09, but just see how this gap is treated early in the session for clues.
Yelp! (YELP) retraced 3.7% to erase Tuesday’s losses. The stock still has some selling pressure from the down trend resistance that has been in place since 10/21. There is some support at $61.50 so see how it handles this level. Below that we have the prior pivot low of $58.42.
Twitter (TWTR) held in relatively well among this group as the new issue closed in the green with small gains of 0.67%. Use yesterday’s low of $51 as the new point of reference to trade around. The stock does look a bit extended after a big five-day move, but is also getting
LinkedIn (LNKD) met some sellers as well and retraced 2.35% yesterday. The 8-day EMA comes in at $229.34 where it could find some support. Below that we have the 21-day EMA at $226.
3-D printing and casino stocks were among the recently strong sectors that pulled back hard yesterday.
3-D Systems’ (DDD) opening gap got sold as the stock pulled all the way back into its 8-day EMA at $77 to close to day down almost 4%. The stock has been stuck in an ascending channel, and a break below that pattern can lead to downside momentum. A move below yesterday’s low of $77 could pull some air out of this 3-DSt printing leader.
Stratasys (SSYS) had a big gap up but quickly met sellers to fill the gap to the down side. The stock has been forming a bear flag pattern following the potent two-day pull back since November 19. A break of the recent pivot low of $115.27 could bring in more sellers.
Wynn Resorts (WYNN) put in a topping tail after making a new high at $183.44. After a big run from $162 within 5-6 sessions, a rest could be due in this casino stock. Some downside follow-through today could lead to a retest of the prior breakout level and 8-day EMA at the $174.50 area.
Las Vegas Sands (LVS) is also struggling to hold upper levels. A break below $76 could lead to additional selling pressure. Some support levels to watch are $75, then $73.50.
Quick hits:
Apple (AAPL) had a breakout failure yesterday at $569.50 and put in an outside day, which is something to take notice of. News that Apple has become the third biggest smartphone player is helping the stock open slightly higher this morning, but it still looks a bit tired. A break and close below the 8-day EMA at $559.60 could pull some air out of it. Next bigger support stands at $546-548 from the 11/29 gap.
Tesla (TSLA) held in relatively well during yesterday’s sell-off. Use yesterday’s low of $139.50 as the new point of reference to trade against. The longer it holds above $139-139.50, the higher the probability it could see higher prices above $145.87.
MasterCard (MA) jumped after the credit card company announced a 10-for-1 stock split and raised its quarterly dividend by 83 percent. Use yesterday’s low of $789.47 as the new level of interest to see if it holds this big gap.
I mentioned earlier that this week that I will remain tactical looking for short-term set-ups with low risk as 2013 has been a tremendous year on all timeframes. I will be traveling today and away tomorrow so I will not be attached but will try to check-in. December holidays are for family, friends and fun – not frustration.
Disclosure: Scott Redler has no positions
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