Facebook (FB) Reports, Markets Look to Hold 2014 Pivot

There are some red arrows around the world as more downside comes in after the Fed tapered QE yesterday as expected. Europe is only down small, less than a half a percent across the board. Asia was hit a bit harder as China’s PMI did come in light. The Nikkei closed down 2.4% but above 15,000. The Shanghai Composite was down 0.8% as it heads into the Lunar New Year.

US markets got hit pretty hard yesterday and seem somewhat confused right now. The Fed further reduced the pace of purchase by $10 billion and don’t seem to mind the weaker than expected economic reports lately. I guess we will see if that continues moving forward and what road they take.

What we do know is that the S&P is trying to hammer out a floor of support around 1766-1772, which is the current spot to trade against. I do think many longs are frustrated enough that maybe we could get some relief. If we trade and hold above 1786ish, maybe some shorts cover and pressure gets relieved a bit. If we get above $1795ish then all the moving averages are curling down around 1803-1812. If the 2014 pivot support doesn’t hold, then another move lower gets underway.

Events in focus today: Initial jobless claims at 8:30 a.m; Real fourth-quarter GDP at 8:30 a.m; Pending home sales at 10 a.m. Earnings: GOOG, XOM, AMZN, CMG, CELG, V, UA, POT among other.

One of the themes for 2014 was some type of correction with muted returns to digest the past two years of gains. I believed two-way trading would be more frequent and stock selection will be particularly key for creating alpha, even as the markets are weaker. The market is rewarding some companies that do hit their numbers and show growth.

Facebook (FB) delivered a solid earnings report and gave two levels to trade after-hours. First resistance was $55.50ish then $59ish. It took out both and is at all-time highs. Now FB needs to hold $59ish to keep the momentum. Good to see stock pickers can be rewarded.

Here is a look at how some other social media stocks look

Twitter (TWTR) found some support at the intermediate support level of $56, then had a nice bounce on Tuesday. The stock has been trying to reclaim the support of its 8- and 21-day EMA. The longer it holds above $57, the higher the probability it could get some upside momentum for a potential break of the short-term downtrend at around $63ish and could give us more upside. Earning will play a big role in the next move.

LinkedIn (LNKD) has been showing lots of weakness recently after the breakout failure at $220. It broke and close below the 200-day after another 4% loss yesterday. The prior pivot low of $198.60 would be the last line of defense for this stock. It has earnings on 2/6.

Yelp! (YELP) lost the support of its 8- and 21-day on the pull-back recently. The stock had a small bounce on Tuesday but gave back all of its gains yesterday with 5.4% loss. Use Monday’s pivot low of $69.80 as the new point of reference. Holding above the 50-day at $69 could keep it in the game.

A look at other stocks that reported earnings

Qualcomm (QCOM) traded up 2% after hours as the company beat its earnings estimate. The stock held above its 100-day on the recent pull back. Holding its earnings gap could lead to some upside momentum in the coming sessions. We did mention the stock could be interesting here as it was very oversold.

Apple (AAPL) shed another 1.14% to break below $502 and did touch below $500. I’m not sure what’s next, but it has some support $492-$496 then the 200-day at $483. I wouldn’t focus on this too much unless something changes with potency.

Netflix (NFLX) held in well yesterday. After holding majority of its earnings gap and a potent break out on Tuesday, the stock has been showing some relative strength. This could be the first one to go once the market finds its footing. Current support stands at $395-398. A break above $407.41 marks a new high.

Caterpillar (CAT) is holding up OK since the surprising positive report. It needs to hold $90ish to stay in the game, then above $92.67 for some momentum.

Microsoft (MSFT) also reported decent results for itself, and showed some relative strength yesterday. Above $37ish it could trade better. This is in the game for now when the market acts okay.

Other set-ups

Tesla (TSLA) held up well during yesterday’s choppy session. The stock found good support at its 8-day EMA, showing relative strength. A break above $179 on good volume could bring in some buyers. It still needs to report earnings.

Amazon (AMZN) has earnings after the close and needs to hold and clear $408ish for an after-hours long.

Qihoo 360 (QIHU) also has a very nice upper channel. Earnings are out soon. A break and close above $96ish could create some momentum.

Bank of America (BAC) acted well the last two days and looks like the strongest bank for now.

It’s been a very tricky tape so far in January. We did have the 1812-1830 area to reduce risk when the accelerated trend broke. It wasn’t that easy to just get short as that didn’t work a lot last year. Now we have some support to trade against. This 4% correction off the highs happened 4-5 times last year and that was it. We need to figure out if it’s the same for this year. We could trade against 1767-1772 for now, but if that doesn’t hold then the 200-day is down at 1705.

Disclosure: Scott Redler is long SPY

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