The market is starting to trickle lower once again Monday, and there doesn’t seem to be too much investors interest in buying this dip. After a small gap up, bulls have been unable to press at all, and it will likely take a more violent downside move for the bigger bounce to come. An acceleration through lows could bring some capitulation type volume and a drastically oversold reading, which usually leads to a powerful snapback.
Keep in mind that we have quadruple witching options expiration on Friday, which usually creates some peculiar type action.
An area traders continue to watch is the Chinese Internet stocks, which have mostly continued to sell off following the carnage of the last few weeks. The two stocks I have been focusing on are Youku.com Inc (YOKU) and Ecommerce China DangDang Inc (DANG), which saw IPO lockups expire last week. With double and triple their previous floats, respectively, these stocks have a lot of supply and most people seem to want out. These stocks seem to have been overhyped as the Youtube and Amazon of China from the beginning, and do not generate the profits necessary to justify previous valuations. DANG in particular continues to just bleed lower, down 11 days straight.
With one final flush perhaps before the market can bounce from extreme overbought levels, it’s important to start lining up stocks you may want to buy. Apple Inc. (AAPL) has been under pressure of late, and if it can get a reversal down through and back its 200-day MA, it would seem like a great opportunity to tier into this long-term bullish stock.
By: John Darsie
Disclosure: Scott Redler has no positions