Actionable Trades: SPY, QQQ, XRT, AXP, NFLX, GLD,

Sellers came into the market early and faded the small gap up in the indices. The move was fast and broke some key support areas in the SPY, including the low from the Japan crisis, $125.28.  Going into today, the market had 8 straight days of selling, and with oscillators showing very oversold levels traders were looking for a bounce. When selling intensified early in the day and appeared climactic, it provided an 80-20 reversal entry. 

After the market was pressured for the first hour of trading, the leaders in the tech sector like AAPL, AMZN, NFLX, and BIDU started bouncing off the morning lows, giving some indications that the market could bounce as well.  A calculated way to buy the dip is with the 80/20 Reversal Strategy. In this case, it was a buy against the morning low, $125.53, with an additional add through the previous low of $125.49.  This reversal strategy is a way to capitalize on an oversold bounce when the market was extended on the downside.  The stop on this trade is $125.53.  Now that we have the strategy we need to see what this leads to. Is it the start of a new move or just a cash flow trade to relieve some short term pressure?  $127.50 is the first resistance area, which is the retest of the neckline in the macro Head and Shoulders Pattern, and the next major resistance area is $128.30-.80, a retest of the 200-day moving average.     

 

QQQ, the stronger index compared to the S&P, the DOW, and the Russell, gave an 80/20 Reversal trade as well.  This is a calculated strategy to buy a dip.   
         

The XRT, the retail ETF, gave an 80/20 entry today, as well.  After seeing a few days of selling, the prudent trader is patiently waiting for an opportunity to buy a dip for a potential reversal trade.  This does not mean the selling is over in the XRT, however it is a good, calculated trade for cash flow, when entering into oversold territories.

   

AXP is another example of an 80/20 trade.  ENTRY: yesterday's low: $48.50.  STOP: low of the day: $47.53.  This could be the start of a swing trade or it could just be an oversold bounce to relieve some short term pressure.  Watch the price action to take profits on the trade.    

  

    

In yesterday's newsletter, NFLX was highlighted as a market leader that started breaking the upside momentum before the market.  Also, NFLX had not closed below support of the 100-day moving average which was $250.92 in a few years.  It came into this support in the first hour of trading before bouncing and closing the day +1%, showing relative strength to the market.  NFLX is creating a steep downtrend line as it pulls off from highs, if it trades above the downtrend line on volume, that will be next entry in NFLX.  Use this as a gauge for the market.  

Today we saw a lot of 80/20 reversal trades as stocks and indicies were extended to the downside.  You can also use the 80/20 strategy to find a calculated short when a stock is extended on the upside.  Gold opened at new highs this morning, and gave a calculated short entry when it began to trade through yesterday's high of $161.62.  Stops are today's high, $162.86.  If this trade leads to more downside action, it could give more confidence to a bounce in the market.  GLD could see a move down to $155.40, the 21-day moving average, without causing any technical damage to the recent strength.

 

Actionable Trades: SPY, BIDU, AAPL, OIH

The possibility of a US debt default still weighs heavily on the market.  Today we saw a small oversold bounce in the morning, which was met with selling in the afternoon for the SPY to close on its lows. SPY is trading below the 100 and 50 day moving averages today.  For now, it is time to stay light and in a wait-and-see mode as things are uncertain regarding the debt ceiling situation.  $129.63 is the next point of reference. Look to market leaders to buy potential dips, but don't start too early. Tail risk is high right now.  

Above is a short term picture of SPY, so when we hit oversold readings like we saw this morning, the active trader can take advantage of cash flow trades.  As for the swing trader, wait for more data and precise levels. Some market technicians are looking at this macro Head and Shoulders pattern that could be developing in the SPY.  This pattern is triggered with a break of the neckline that stands at $128/$128.50.  If this pattern triggers, the target is $120-$117, which corresponds with a big support area from last November.  It is hard to be short going into the weekend with the headline risk that is out there.     
   

Today we saw a small bounce for the active trader but for the swing trader, wait for more clarity.  There will be an opportunity to buy back market leaders once this market settles, and BIDU is certainly one of the market leaders after a strong earnings report.  This is a stock to buy a dip, but wait for key support levels.  First zone to test a buy back is a retest of prior highs: $156.06-$152.90, which is the 10 day moving average.  If that zone doesn't hold, look to bigger support level of $147/$147.50.  BIDU is trading far off its moving averages, it would be healthy to see some digestion in this stock before working its way higher.

AAPL is another go-to stock for strength after a blockbuster earnings report this quarter.  AAPL is extended well off its moving averages.  First spot to test a buy back is $383.90, which is the low from its earnings gap and coincides with the 10 day moving average. The next level to test a buy back is $366-$364.90, a retest of prior highs.      

It was noted earlier this week that the OIH's were coming into the resistance area that was highlighted from the previous buy entries, which was a good spot to lighten up on the trade.  $155-154 is the first area to test a buy back.  $150 is the next key area to hold in the OIH's, which is support of the 50 day moving average.  Remember to buy dips in the market leaders when the market is in correction mode. 
       

  

Sometimes in the market, there are times to be in cash, and now is one of those times.  

Actionable Trades: SPY, MCP, BIDU, YOKU, INTC, V, SLB, SLV, TZOO

SPY is holding the $133 level for now.  There are a lot of strong earnings from market leaders, but it is waiting on a resolution to the debt ceiling.  The chart still looks constructive as we flag in front of resistance and hold above key moving averages, but the action right now is very headline driven. While most expect a deal to get done at the 11th hour, it is important to stay plugged in.  Tonight we saw positive earnings from AMZN and LVS.  

Trade Update:  MCP has been a good focus in the past week with the first entry at $55 with an additional add-on buy above $61.  It closed strong today, +6.25%.  Use your own trading rules to take profits.    

 

BIDU has been another good targeted trade as it made a strong move into earnings.  Positive earnings were released last night.  BIDU gapped above 52-week highs and looks good for higher prices.  Wait for a few days of consolidation of this big move as it is extended from previous buy entries.

 

The Chinese internet sector showed relative strength to the market today after a strong earnings report from the leader in the sector, BIDU.  YOKU is a laggard play in the sector, but has a decent chart set-up and closed the day +9.50%.  Today was the first day up in this stock, look for continuation over today's high of $37.45.   

 

The semiconductor chip makers have had solid moves from stocks like IBM, MSFT, and INTC. The stock is a bit of a slow-mover, but a close above $23.25 in INTC could trigger a move to new highs.   

  

The credit card sector is performing well.  Visa has earnings tomorrow, Wednesday, July 27th, after the close.  It could have a run into earnings or wait til after to make a move.  Look for a momentum play above 52-week highs of $90.83. 

 

SLB, an oil stock, posted earnings last Friday, July 22.  It is holding the gap-up and consolidating in front of 52-week highs of $95.64.  This could have a momentum move through those highs.  Watch the price action in this stock.

 

SLV is holding above the 3 month range.  An additional buy is above $39.90-$40.  Also look to the chart of FXE which looks good for higher prices, which has a positive affect on commodities.  

For the active trader, TZOO is setting up for a quick trade.  Although, it had a big gap down on earnings, it is holding up well and the range is getting very tight.  Look for a move above today's high of $61.60 with an add above $63.27 to fill some of the earnings gap.  First resistance is $67.28.   

 

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.

The Four Horsemen of the Tech Sector: Leaders to Watch in Volatile Markets

Over eight months the market has steadily climbed upward. This ascent has been guided by the technology sector, and four explosive companies have led the charge.

Apple (AAPL) has been a leader, but as of late, its momentum has stalled. This slowdown in forward momentum is reminiscent of price action last summer. From a technical perspective, the stock has been forming a bull flag and has been holding above its 55 & 210 ema. I would be hesitant to invest more than a feeler at this point until it more clearly resolves to the upside and starts to break above resistance at $360. SmartStops.net indicates the short-term stop is $341.06 and the long-term stop is $339.49

Google (GOOG) has been the laggard in this group for some time now. Lower than expected earnings and the market’s disdain for new CEO Larry Page have led it down. And while it may be tempting to buy on recent news, the technicals don’t bear it out. The stock is trailing the 55 and 210 ema. Smartstop.net projects the short-term stop is $527.77 and the long-term stop is $525.04

IBM (IBM) has shown relative strength, leading the 55 and 210 ema. After a brief pullback the stock looks like it may make new highs. Smartstops.net has the short-term stop at $165.73 and the long-term stop at $158.75

Amazon (AMZN) has been the recent leader in this group after nearly bouncing off it 210 ema. The stock is showing a lot of relative strength and looks to continue to make new highs. Smartstops.net has the short-term stop at $187.85 and the long-term stop at 168.24

The four horsemen were leading indicators of doom. Keep an eye on leaders to protect yourself from volatile markets. Market leaders are known to drop 72% from their peak per Investor's Business Daily.
Editor's Note: This content was originally posted on SmartStops.net.