Monday, September 26, 2011
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Don't get too comfortable in this market. The action is definetly keeping traders on their toes, but it's difficult to trade because much of it is headline-based. The SPY was gapped up this morning, following the lead of the European bourses. SPY went negative early, but found found support at $113, Friday afternoon's key support level. Markets bounced strongly from that level and were quiet during lunch, but rallied strongly into the close on hopes that a plan to stablize European financial banks is in the works. Today we saw an oversold bounce in the weakest sectors. Financials led the rally early, and then midday Energy and Industrial stocks joined in the oversold bounce. This Friday is the end of the 3rd Quarter, and for some Mutual Funds it is the end of the year. This could lead to a bounce in the market for end-of-quarter "window dressing." Monitor the action to see if today's rally has any validity. If the bears want to remain in control, they should not allow the SPY to get back into the wedge. $116.50 will be a key resistance level for the bears.
Today we saw some of the strongest moves in the most beaten down stocks. It was not an easy trade and we do not make a habit of being bottom-feeders, but it is something interesting to note. These stocks are broken and will take time to repair, but for now they have given entries for micro cash flow trades. It will be key to measure the strength of the bounce in the beaten down sectors.
OIH has been highlighted as a weak ETF as it hovered on the lower end of the range while the market bounced. Last week OIH finally broke to the downside of the wedge with significant follow through. This ETF has been beaten down and is bearish overall, however it could provide a cash flow trade for active traders. Around lunchtime today, the T3 blog posted that OIH was triggering an 80/20 trade as it trade back through $108.31 with stops at the low of the morning ($106.16). OIH closed the day up 3.75%. There is a gap to fill in OIH from $111.22 to $118.60, which would be a good percentage move for an oversold bounce trade.
FCX also provided an oversold bounce as it held the lows of the previous two days. FCX closed the day up 4.32%. This stock just started to enter a gap that it fills at $35.50, and if the strength remains, it could trade up to $37.50.
Moving on to some of the leaders... How is the list of "Go-To" stocks performing?
AAPL opened the day down when the futures opened higher, showing weakness early on based on what turned out to be an erroneous report from a JP Morgan analyst. There was news on slowing iPad production pressuring this stock in the first half of the trading day, but the analyst withrew the report based on a misunderstanding about a shift in production facilities. AAPL found support at the 21-day moving average and saw a strong bounce from that level. This stock closed back above the $400 level and was only down 0.28% on the day. If AAPL has any follow through above today's high of $403.98, it could trade up to $409 or $412.
The casino sector was hit hard early on today, but managed to gain strenght in the afternoon to close off the lows. WYNN, the leader in the casino sector, is forming a Head and Shoulders pattern with the neckline at $130. If WYNN closes below $130, the measured move is down to $90-$85. This stock continues to tail at the 200-day moving average.
Below is a weekly chart of WYNN. This stock continues to find support at this multi-year trendline- Will this change?
MA did not participate in today's rally and closed the day down 0.78%. This stock is trading above key moving averages. You can be long MA versus $323-$320, but this stock is trading in an accelerated ascending channel. Typically ascending channels are bearish, so the $323-$320 level will be significant in this stock.
CF is the leader in the agriculture stocks. This stock started to break down before the market last week and saw an extreme pull-in off the highs. This stock continued to tail through the 200-day moving average before turning higher today. CF found support at the yearly trendline. This stock could see an easy bounce to the $159/$160 level and bigger resistance is $166. This stock broke down before the market last week and bounced before the market today.
It was stated that GLD was getting choppy at the upper end of the range and at the end of last week, GLD was pressured before getting liquidated in Friday's trading session. GLD found some support today as it retested the last breakout area of $153/$154, and was able to close off of lows. GLD could see a bounce up to $163-$165 level before it is time to reevaluate the trade.
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