Bounce Continues Ahead of Yellen Comments

There are more green arrows around the world this morning as the bounce back continues. Europe is moving well and Asia also continues higher. Today S&P futures are up 5-7 handles extending into the 50-day EMA at 1809ish.

You can always measure action for clues on how to navigate. Last Wednesday the S&P had a Red Dog reversal at 1739ish, a spot to test longs and cover shorts. On Thursday it continued higher above 1755, breaking above that lower pivot. Friday it penetrated through 1770ish, a spot that would have held as resistance if the market was going to remain very weak. The S&P went as high as 1798 and yesterday digested to show commitment higher (no failure).

I do think for a “cute short” type of trade idea perhaps you could short 1809-1817 for a rental even if we haven’t seen highs of 2014 (which I don’t think we’ve seen). If you were jumping out of your skin a week ago and have a lot of positions, this could be the time to buy insurance while it’s much cheaper than it was last week at this time.

Today we get new Fed Chair Janet Jellen releasing her remarks at 8:30 AM ET and then Congressional testimony at 10:00 AM ET. Here are some questions the markets would like to be answered:

1. How much does she worry about the softer data?
2. What does the Fed think about the emerging market weakness?
3. What does she need to see to “taper” the “taper”?
4. What type of slack does the economy have?
5. How will she go about wording forward guidance?

I will be paying more attention to the price action than the comments themselves.

In today’s Morning Call we will look at some biotechs.

The Biotech ETF (IBB) was mentioned in our Morning Call yesterday and it did break above Friday’s high of $246, which could bring in some buyers. The ETF extended higher with almost a 2% gain to lead the market up yesterday. The next pivot to watch is the current all-time high of $254.11.

Biogen (BIIB) had some upside follow-through after Friday’s strong rally to close the day up 0.70%. The stock has been holding above its 21-day EMA showing relative strength. A break above $321.25 would mark a new high.

Celgene (CELG) had a nice reversal move on Friday to reclaim its 21-day EMA. It had some resistance at $157.83 from the curling down 8-day EMA. A break and close above this level could set it back in motion for a stronger bounce.

Gilead (GILD) had a nice two-day rally as the stock logged another 3% gain yesterday. A break above last week’s pivot high of $82 could open the door for a retest of the current all-time high of $84.40.

We will also look at the Social Media group that has developed multiple divergences.

Facebook (FB) took a break as the stock retraced 1.2% after making a new high at $64.57 on Friday. The stock held the top half of Friday’s wide-range bar. The longer it holds above $62ish, the higher the probability it could see another leg higher above $64.57.

Twitter (TWTR) had some resistance from the earnings gap at $54.92 but the stock has been making higher lows since the post-earnings pivot low of $50. A break above $54.92 could help it fill a portion of the big earnings gap. It does feel like it needs time, though.

Yelp! (YELP) had a big overnight gains due to the search deal with Yahoo! (YHOO), but sellers stepped in quickly to fade the big opening gap. The stock gave back most of its gains to close the day up 2%. Next support sits at $87.60 from Friday’s low. Holding above this upper support to allow the moving averages to catch up would keep its momentum intact.

Zynga (ZNGA) has been holding higher after the big gap up on 1/31. The longer it stays above $4.40, the higher the probability it could see another round of short squeeze above $4.97.

Metals looked very tight on Friday and broke above some key resistance spots yesterday. Today they are getting some follow through pre-Yellen, perhaps in anticipation of some dovish comments. Let’s see how they react after and if they can hold.

Gold (GLD) broke above and held $122.50 and is looking around $124ish pre-market. We need to see if that holds after Yellen. The next spot to watch would be $124.86.

The Gold Miners ETF (GDX) broke above $24ish and then got follow-through yesterday. It could see some resistance around $25.29.

Silver (SLV) is not participating yet and needs to get above $19.85ish to get interesting for traders.

Select tech stocks also provide great movement.

Apple (AAPL) had great upside follow-through after Friday’s gap as the stock tacked on another 1.8% gain yesterday. It has reclaimed the 8- and 21-day EMAs. Next resistance to watch sits at $538-540 area.

Google (GOOG) looks like it could be headed higher. See if it can get above its 2014 high pivot at $1186ish.

Green Mountain Coffee (GMCR) still holds up well. It needs to clear the $113.50 pivot for another trade.

SodaStream (SODA) has been holding higher since its move off of lows last Thursday. A break above $40.90 on good volume could lead to some more short squeeze action.

Tesla (TSLA) has enjoyed a nice move since the RDR at $137.82 on January 14th. Yesterday it had a nice gap and go to the upside. If it can get above $199.30 it could get that $200+ print as earnings still aren’t for a week.

First Solar (FSLR) has been inching higher after buyers stepped in at the 200-day at $47 area last week. The stock has reclaimed the support of its 8- and 21-day EMA. It has room for a move up to $54.63 where it could see some resistance from the gap from January 6th.

Bank of America (BAC) is getting tighter as the banks have been weaker. It needs to clear and hold $16.95 to get back on track.

Disclosure: Scott Redler is long AAPL, SODA, BAC, TGE, FSLR, ZNGA, GLD calls. Short SPY.

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