Market Remains Under Pressure, Precious Metals Bounce Continues
S&P futures overnight hit as low as 1303, but has pared some of those overnight losses this morning as we are now set for only a marginally lower open. Despite bouncing slightly this morning, the composure of this market remains bearish. Global headlines, especially from Europe, are one again starting to weigh on the proceedings. Many traders will be watching that 1303 level, and then 1295-1298 pretty close as well, if we can get there in the next few sessions.
While the action continues to be bearish in May, most traders are not chasing shorts at these oversold levels, but instead targeting relatively strong stocks for potential oversold bounces. Some leading stocks are still acting ok in the midst of this market weakness. Traders are also relishing these hot IPOs during what has otherwise been a quiet period in the market. LinkedIn Corp (NYSE:LNKD) was a bonanza not seen since the dot-com boom era, and then Yandex NV (NASDAQ:YNDX), the “Google of Russia” wasn’t too shabby itself yesterday.
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Now let’s take a look at some stocks to see if we can find some relative strength that might be buyable on an imminent oversold bounce, starting with Tech.
Apple Inc. (NASDAQ:AAPL) is grasping to hold the $330 area, under this you have $326 and then $320. The stock acted well on Monday despite a weak tape, but will need the market to firm up to really push higher, or is it vice versa?
Salesforce.com, inc. (NYSE:CRM) is super strong as it continues to hold its earnings gap. The stock broke above a $147-149 for a nice day trade yesterday. If it continues to act well here, when the market finds its footing, make sure to track this one.
VMWare, Inc. (NYSE:VMW) is still building a nice upper range. One of these days it will break above $96-97 and get going. It will need market conditions to get a bit better, though.
Netflix, Inc. (NASDAQ:NFLX) still acts super strong, and had another nice cash flow move above $250 yesterday before closing below. The afternoon pull-in was somewhat discouraging for a stock that looked like it might blast off, and it will need a powerful move above $250-255 to get me really excited. It should be one of the first to gain upside momentum when the market firms up.
Intel Corporation (NASDAQ:INTC) broke its upper range a few sessions ago after the GS downgrade. $22.50 is a level but I won’t be really interested until $21.75-$22. I would watch action in AMAT, it reported earnings after the close.
Amazon.com, Inc. (NASDAQ:AMZN) has been resilient since its strong earnings report, but turned lower yesterday and looks a bit weaker right now. $191-192 is an important area. If it fails there, we can see $185ish.
Baidu.com, Inc. (NASDAQ:BIDU), after holding the 100day MA, has softened once again. Those that shorted that rally did pretty well. Now it’s important to see if it can hold $124.66-126.50 for perhaps a double bottom.
Google Inc. (NASDAQ:GOOG) acts gross unless you short every rally. If it doesn’t hold $510-513 then it can see $498 and then a very big level $480ish.
The new issues should be on the radar as they still provide great momentum trades. Although overvalued from an investing point of view, they are great trading vehicles.
LNKD had an awesome first day of trading that reminded traders of tech boom IPOs. Yesterday was a perfect “Rope a Dope”, was first day you were allowed to “short” it, was weak all day, and then popped into the close, likely squeezing some of those shorts. Stock will need time to create a proper range to trade now, but next big resistance is $102 then $107. Support is $88 and then $84.
YNDX was great day yesterday as well on its first day, providing a very strategic trade, let’s see if we can get day 2. If it trades above $39 and holds, it can go again.
Metals have been a nice focus area for trades the last couple days. Gold broke it’s lower wedge on Friday, and has since seen a nice 3-4 strategic up move as it triggered at $146 area. Traders are taking profits quickly in this volatile arena, but there could be more upside to come.
Some of the volatility was sucked out of silver with the margin requirement increases, but set up nicely for a trade yesterday. The range got tight and when it broke above $35 in the iShares Silver Trust ETF (NYSE:SLV), that triggered the momentum trade. It’s opening up today (at this point) around $36.45, so we are seeing some solid continuation. It has “easy room” to around $37 and then $38 will be much bigger resistance.
Oil opened higher yesterday on the GS bullish commodities call, but couldn’t get the traction of the metals. On the service side of the things, the Oil Service HOLDRs ETF (NYSE:OIH) has an interesting set-up as it’s trying to hold this lower range. Above $150-150.50 it can see a move back to the $154-155 area. But market will have to hang in for that to happen.
The oil refiners have some decent set-ups as well, like Holly Corporation (NYSE:HOC), which looks to be breaking above a pivot.
The banks bounced on Monday (and have made a habit of trading counter to market) and are trying to hold this lower level.
JP Morgan Chase & Co. (NYSE:JPM) broke the 200-day MA and came back above. If you have to be long, you can trade it against $41.69.
Bank of America Corp. (NYSE:BAC) has been bleeding for months, perhaps because of ongoing mortgage issues, and is a definite avoid in this group.
Goldman Sachs Group, Inc. (NYSE:GS) continues to drop like a rock, and traders have isolated 3-4 short entry areas. Being so oversold, it might try and bounce back up to $138-140.
While there has been some select action, especially with the IPOs, overall things are quieting down as we head into Memorial Day. Traders are finding it difficult to find an edge at this level. With QE2 ending and the recovery stuttering, is the rally running out of steam, or is this simply a run-of-the-mill 5% technical correction? Summer trading requires a sniper approach, and you can’t get greedy. But the sun is finally starting to poke through on the East Coast, and there’s something to be said for that.
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. Scott 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, Scott 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, he maintained his status as a top trader in the industry while working closely with all traders in the firm to dramatically increase performance. Scott has participated in more than 30 triathlons and one IronMan triathlon, 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 and Bloomberg, and he has been quoted in the Wall Street Journal and Investor’s Business Daily among other publications. Scott produces much of the media and content available to subscribers and followers. T3LIVE.com is an online financial media network and education platform that provides active traders and investors with market analysis, real-time access to strategies, and in-depth training from real traders, real-time.
*DISCLOSURE: Scott Redler is long YNDX, SLV, NFLX, BAC, OIH, CRM, POT, LNKD, AAPL. Short SPY.
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