There are more red arrows around the world this morning. Europe is on its third down day but it still feels a bit controlled. The DAX is off -1.2%, FTSE -0.27%, CAC 0.46%, AEX -1.17%. Asia finished mostly lower as China’s flash PMI fell to a seven-month low. The Nikkei closed down 2.2% almost at the lows of 2014 (-12%) but the Shanghai Composite continues to show some resilience lately.
The S&P couldn’t get the power to break above all-time highs yesterday and reversed pretty hard. In the morning the S&P did a Red Dog Reversal around 1845ish and then closed below the prior low, giving us a “outside day.” That type of action typically represents a day to use high level stops and reduce some risk – a day to measure your time frame just in case it leads to a further decline. Most indices formed the same type of pattern. Now we map out some support to see if it’s buyable with a minor down move, or something more significant.
Checking the technicals of some sectors:
S&P 500 ETF (SPY) pushed through all-time high then quickly fell back below to put in a Red Dog Reversal at $184.49. The ETF closed down 0.64% to make it an Outside Day, a day to take notice. Next upper level support stands at $182.67. The 8-day EMA comes in at $182.18. Below that we have $181.75 as a key level.
The Nasdaq ETF (QQQ) also slid off of highs to log a 0.80% loss. There is some support at $89.33 and below that we have $88.82 where the 8-day EMA could provide some support.
The Biotech ETF (IBB) had a small Red Dog Reversal at $264.58 to retrace 1.1%. A pull-back into the 8-day EMA at $256.50 could provide some buying opportunities in this leading sector.
The Financial Sector ETF (XLF) had a big engulfing bar to close back below its 8- and 21-day EMAs. The ETF closed the day down 1.4%, showing some relative weakness. There is some support at $21.20 but the bigger level is $21.
The Consumer Staples ETF (XLP) are trying to hold recent gains as it found some support at its 8- and 21-day EMA. The next support level stands at $41 where the 200-day EMA could provide some support.
We will also take a look at high beta tech that has been mixed with select opportunities.
Apple (AAPL) put in a topping tail at downtrend resistance on Tuesday, flashing a signal to take some caution around $550ish. The stock got some downside follow-through to retest its 8-day EMA at $535ish yesterday. It’s down pre-market based on a Barclays downgrade. See if we can get a buy signal around $530ish as most moving averages do converge in that area. If this area doesn’t hold this stock will move down my list.
Google (GOOG) had a small pull-back of 0.73% but is still holding above its 8-day EMA. Watch this key moving average at $1192ish as it could see some dip buyers at this level.
Netflix (NFLX) is retesting its 8-day EMA and closed on lows, showing little buy interest at this key level. A break below the 8-day at $428ish could pull some air out of it. There is some support at $425 and below that we have the 21-day EMA at $409ish.
Baidu (BIDU put in a topping tail with a top at $177 after a big move pushed it out of the recent descending channel. Maybe it can be buyable on a pullback to $168-$170
Priceline (PCLN) has been an absolute rock star leader but also reversed yesterday. Its 8-day EMA is $1249 then the 21-day is $1208.
Social media has developed a lot of divergences and is getting a lot of attention this morning as Facebook (FB) buys popular messaging app WhatsApp for $19 billion. A lot of people are shocked by the size of this deal, thinking that FB overpaid, and the stock is down almost 4% this morning as a result. FB has enjoyed a very strong run, though, so I will look to see how it handles this. The 8-day is $65.86 and it’s been above this EMA since the last quarter’s earnings. The 21-day is $62.56.
Twitter (TWTR) gapped down sharply on earnings but since then had a nice trade to get into the gap. Now it needs time to create a new pattern.
LinkedIn (LNKD) had a nice RDR at $185.73 on Tuesday then a Day two above $192 on Wednesday to get as high as $198.69- that was the snap back. Now see if you want to stay with it.
Yelp! (YELP) tried to go yesterday but couldn’t break and hold above $92.50. I guess it needs more time. Intermediate stops could be placed at $88ish.
Zynga (ZNGA) could use rest after a big run. I’d like some for it to do some work above $4.90 before higher prices.
Tesla (TSLA) had a strong report after the close. It cleared $206ish in the after-hours and hit $222ish, but it’s off that highs now trading around $216-217. It could use some time now but use $206 as your pivot.
Solar names pulled back a bit and could use more time. This group does get a little tricky. The names to watch are SCTY, FSLR, SPWR and CSIQ.
Metals pulled back a bit yesterday after a nice move in 2014. I think the GLD bugs would like to see $125.60ish hold. SLV needs to hold $20.34ish to maintain its bullish composure.
Disclosure: Scott Redler is long ZNGA, CORN. Short SPY.