Actionable Trades: SPY, AMZN, ARCO, RENN, MON,

We are beginning to see signs of stalling despite the markets finishing higher for the 4th day in a row.  Strong stocks sold off hardest, which is our first sign of this rally exhausting.  1225 - 1230 has been targeted as a resistance zone for longs entering last week and we have now reached that level.  This would be a prudent spot to sell all longs. The rally came on light volume, we have some important economic data over the next two days, and upcoming holiday will likely make the market even thinner the rest of the week. For the active investor, this is now a spot to potentially test some small short positions and look for a move back to 1200.



SPY are beginning to stall as they come into resistance at $123.50.  It would be prudent to trim some long positions, and begin thinking short in the short-term. The economic data coming Thursday at 10am with the ISM and Friday at 8:30am with Non-Farm Payrolls and Unemployment Rate should be very interesting. Will bad data trigger a sharp sell-off or will it be perceived as the final straw before QE3.




Here are two stocks that are entering overbought conditions and could be due for a pullback.  Look for an 80-20 short-setup in these stocks.  

AMZN has run $15 points in 4 days and it could use a rest.  Look to test shorts as this is overbought in the near-term.



This rent McDonald's franchise IPO has made a big run with the market this week and it can be looked to as a short.  Look to short in this area or higher and add as it comes back through yesterdays high.




Below are 2 charts that have bearish setups and should be looked to as shorts when the market heads lower.  

This IPO was once acclaimed as the "Facebook of China".  It has been plummetting since its introduction to the market and has a setup to make another move lower.



Agriculture stocks were the first group to show weakness today and this is the weakest of the group.  The macro pattern is getting tight and it could be poised for a break below major support levels.

Will LinkedIn's IPO Confirm Internet Bubble 2.0?

Three years ago, at the peak of the financial crisis, Jamie Dimon’s daughter reportedly asked him, “Dad, what’s a financial crisis?” His reply, “Something that happens every seven years.”

The crisis that preceded the current one was caused by hyper-inflated valuations of Internet companies that made no profit, and about whom investors knew little or anything about. Sound familiar?

Yes, we could be talking about numerous companies that have hogged recent headlines: Facebook, Zygna, Twitter and LinkedIn, for example. All are purveyors of what's known as “social media.” All have been the subject of intense speculation and rather opaque trading in the private stock trading markets. But now one is about to depart the safety of those illiquid markets and is venturing out into the public.

LinkedIn goes public this morning with as much hype as can be expected of the vanguard of social media. Despite its $45 price, many observers, myself included can only wonder if its fate will resemble that of Renren (RENN). The self styled "Facebook of China”, Renren has had a very rocky reception in the market since its own IPO. It's now trading at little more than half of its public offer price.

My gut tells me LinkedIn’s IPO may be more of the same. There's a lot of excitement, regarding this company. Smart traders and investors sell when the market is excited. I would wait until some of the fervor dies down before entering this trade.

Now if you're interested in web-based companies but seek those positive checks smart investors seek, such as profits and market share, you will not have to wait for a possible Facebook IPO. The cloud space has several established players but none is bigger than Salesforce.com (CRM). Salesforce is the market leader in customer relationship management software and is growing consistently. Its current valuation at 10 times sales may seem steep, but given the vast array of analysts who believe its price should be around $155-$170, it may be turn out to be a value growth play if the market continues yesterday’s upward bounce. SmartStops.net has a short-term stop at $125.79 and the long-term stop at $121.66.

If cloud computing seems a little far-fetched for you, what about business-to-business networking, otherwise known as social media for businesses? Now imagine it coming to the web. I’m talking about potential $12 trillion in business. Did that start up your saliva glands? Ariba (ARBA) is the leader in this space. They are a way ahead of their competition. And the market has appreciated its subscription-based revenue model, pushing the stock up 400% in the past four years. So, is Ariba undervalued, or is LinkedIn overvalued? The market will tell us. According to SmartStops.net Ariba’s short-term stop is at $29.67 and the long-term stop is at $28.49.

Editor's Note: This content was originally posted on SmartStops.net.