Morning Call: Thankful Bulls Look to Maintain Momentum

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November 26, 2012 11:03am ETF BASIC NEWS

First off, we hope everyone had a great Thanksgiving weekend with friends and family. Some pundits are saying last week’s rally was a “conspiracy” rally aimed to get spenders out for the Holidays. If that’s the case, market timers had a lot to be thankful for

after the outside day (Red Dog Reversal) on Friday, November 16 revealed the market’s intentions for potential higher prices.

Last week played out very well from a technical standpoint. Friday we had the outside reversal, which marked a potential direction change. Monday we got the potent upside follow-through that shows demand for stocks at higher prices. Tuesday and Wednesday we digested higher above the 200-day moving average, showing commitment to that level. Then on Friday, we got nice upside continuation.

I went over this strategy live Tuesday on Bloomberg: Redler: Bears to Make Stand at 1403 to 1408

Last week’s action was enough for IBD to put us back in a confirmed uptrend. Typically when this happens it means the market just had a nice move and could use a rest, so the subsequent days are very important. Although this new fledgling rally doesn’t always lead to a major bull run, it’s a key first ingredient.

Last week, I went back to a more portfolio approach as I saw some nice relative strength and chart patterns. Some strong stocks that showed relative strength during the market corrective process were my focus. I think putting on an overlaying hedge and then adding to it into extensions like we saw on Friday will help deal with some overbought softness like we are seeing this morning.

Futures are down 4-6 handles and I do think we need to do some work above 1396-1403. We are above the 200-day MA but below the 50-day. The next obstacle for the bulls will be to reclaim that 1422-1427 area but it could take a bit of time.

I know we still have to deal with Europe and Greece’s third round of free money. While progress has seemingly been made on the fiscal cliff negotiations, the urgency to get a deal done grows as we head towards the New Year.

Apple (NASDAQ:AAPL) showed nice commitment to the bounce last week and is flagging in front of the gap at $580.

LinkedIn (NASDAQ:LNKD) is showing relative strength as it bounced with the indices last week. It could use a rest after six consecutive up days.

Google (NASDAQ:GOOG) is struggling to take back the 21-day, which is sloping downward. It could trade between $650-675 into month’s end.

Amazon (NASDAQ:AMZN) is showing relative strength as it traded to November 12 highs during the retail focused week. It might find major resistance near $245.

If this market wants to keep this new fledgling rally intact, we should not close below S&P 1386-1391 in coming sessions.

Make sure to take advantage of our Free Online Trading Course to kick-start your trader education.

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 Invest.

Scott is currently the Chief Strategic Officer of T3 Live and is a Registered Associated Person of T3 Trading Group, LLC.

*DISCLOSURES: Scott Redler is long AAPL, BAC, SLV, QCOM, SBUX, FB. Short SPY.

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