Red Arrows Around the World this Morning

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.

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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