Jun 162015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was an interesting day as the S&P500 rebounded from yesterday’s selloff. The chart doesn’t suggest this bounce is any different from all the others that failed. The gains were modest, we closed under 2,100 resistance, volume was below average, and we continue making lower-highs. The notable exception is the situation in Greece deteriorated materially, yet the market rallied.

We easily could have crashed a couple dozen points as Greece’s politicians refused to negotiate with European leaders. That’s what common sense says should have happened, so why didn’t it? The thing many speculators fail to understand is headlines, fundamentals, and technicals don’t move markets. Only people changing their outlook and making adjustments to their portfolio drives price. It doesn’t get any more simple than that. Shifting expectations and the resulting buying and selling move prices, period, end of story.

Puting today’s move in context, stock owners read the Greek headlines, shrugged and went about their business. The reason we didn’t see the “common sense” selloff is every owner who fears the Grexit is already out of the market. When there is no one left to sell the news, it no longer matters.

Today’s price-action is telling us Greece isn’t a big deal anymore. Without a doubt these headlines will continue to drive volatility, we could remain range-bound, and will likely see a kneejerk selloff when Greece finally defaults and gets the boot, but today’s trade tells us this will be a short-lived move since most of the Grexit sellers are long gone. The way to trade the volatility is to continue buying the dip. While this market will eventually crash, it won’t be because of something everyone is talking about. Remember, people don’t get hit by the bus they see coming.

Individual Stocks:

$AAPL – Apple is mirroring the indexes and it’s fate rests with the rest of the market. Last week’s developer conference came and went without a major catalyst and it will be a while before we have another one. There is no reason to sell the stock, but there isn’t much to get excited about either.

$EBAY – Fairly dramatic move today. The day started with a bang as the stock popped a dollar and a half at the open, but the move quickly fizzled and we finished with a much more modest fifty cent gain. While I’d prefer to see more constructive price-action than this intraday reversal, we remain above support and today’s pop shows the explosive potential remains to the upside. We are close to the breakout point and we need to watch this one closely, but it isn’t time to pull the ripcord yet. Failing to hold $59 and we will be forced to reconsider.

$ORCL daily

$ORCL daily

$FEYE – FireEye continues to ramp up. While it is exciting to see these gains pile up day after day, owners should be shifting to a more defensive posture. We’re close to a 20% gain from the breakout point and it wouldn’t be a surprise to see the stock pause near $55. While it could easily continue racing higher, only a fool would be disappointed by locking in a 20% gain over a few weeks. A more aggressive stance is moving up a trailing stop and letting it ride. We have modest support near $50, but there is a good chance a near-term pullback will under cut $50 for no other reason than chasing off all the owners with a stop under $50. The proactive trader that locks in profits near $55 could reenter following the $50 undercut and bounce.

$ALGN – Align is marching ahead and pennies away from eclipsing January’s intraday highs. At that point virtually everyone in the stock will be sitting on profits and excited to see them continue growing. Confident owners keep supply tight and prop up prices. An Ebay style pullback to $60 is possible so it is riskier to chase if someone isn’t involved yet.

$ORCL – In the big-cap space, Oracle is getting interesting. Today’s 2% gain on 60% above average volume makes this worth a look. We’re on the verge of breaking through the upper end of the $45 trading congestion. After that, the only thing holding us back is last December’s $46 highs. Clear this and we’ll be making multi-year highs. While not as exciting and fast-moving as some of the smaller growth stories, profits are profits and some slow money offsets the volatility from more speculative holdings.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN $ORCL

 

 Posted by at 10:05 pm on June 16, 2015
Jun 092015
 
S&P500 Daily at end of day

S&P500 Daily at end of day

End of Day Update:

The S&P500 finished flat after modest moves lower and higher failed to stick. Volume continues to be below average as we slip further into the summer doldrums.

While economic indicators, corporate earnings, mergers, Fed statements, and other headlines come and go, the market remains stuck in neutral. The biggest item hanging over us is the impending Greek default if a deal cannot be brokered in coming weeks. It seems many with cash are waiting for a resolution before they feel comfortable buying stocks near all-time highs. And so we trade sideways while we wait for the situation to unfold.

A common saying is you never get hit by the bus you see coming, and that clearly applies to this Greek debacle. The Grexit has been in and out of the spotlight for years. While the global financial system was vulnerable early on, most Greek debt has since been absorbed by the ECB and other European nations, leaving the wider private sector largely immune to a Grexit. While stock prices are held back by a fear of the unknown, the Grexit will actually be a bullish catalyst once it turns out far more benign than most fear. But the market trades on perception, not reality, so we should anticipate near-term volatility as this standoff comes to a head over coming days. But when scared owners start offering stocks at steep discounts, that is our opportunity to step in and profit once the storm passes.

Individual Stocks:

$EBAY daily

$EBAY daily

$AAPL – Apple opened weak the day after its developer conference keynote failed to excite investors. But we knew this was coming. Short-term traders can trade around near-term volatility driven by broad market weakness, but the iPhone story remains intact for long-term investors as long as $122 holds. If we slip to this level, we will have to watch the situation more closely and reevaluate.

$EBAY – Ebay is testing the breakout level, giving those that missed the initial move the opportunity to get in. Of course given human psychology, it is far harder to buy the pullback than the breakout even though the real risk is actually reduced as we slip a few points from the highs. The key is holding $58/$59 support. For the breakout or dip buyer with a $60ish entry price, this represents a fairly attractive risk/reward, but for those that chased the stock up near $63, the risk is quite a bit larger.

$FEYE – FireEye is doing a good job holding recent gains, but it is up 10% from the breakout point and anyone tempted to chase only needs to look at EBAY for what can happen if you show up late to the party. Either wait for a pullback, an alternate entry point, or simply look for another trade. There is no need to chase, especially given the recent weakness in the broad market.

$ALGN – Align is also pulling back as the wider market softens. This continues to be an interesting story, but very few stocks can stand up in the face of a weak market. As soon as we get the green light from the market, these individual stocks will start trading strong again.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN

 

 Posted by at 11:16 pm on June 9, 2015
Jun 082015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

The selloff continues as the S&P500 falls for the third consecutive day. This pushed us to 2,080, a level that’s acted as both support and resistance multiple times this year. While not as psychologically important as 2,100, it was meaningful enough to arrest the slide. The question now is if this puts the worst behind us.

Volume was the lightest we’ve seen in weeks, showing the technical weakness didn’t scare many owners and the dip was more due to a lack of demand than a surge in supply. While it is nice to see owners remain confident, capitulation bottoms form when owners panic and dump stock at a steep discount. Clearly that didn’t happen today. That means either we see a slow and methodical rebound from here as tight supply trumps light demand, or we plunge lower and trigger that emotional capitulation bottom. Slow climb higher or sharp selloff lower? The risk/reward seems pretty clear. But in spite of that, I continue to be bullish medium-term for all the reasons I listed in last week’s posts and am looking forward to profiting from a near-term emotional drop in prices. For those with long-term portfolios, don’t let this noise or price-action shake your resolve.

Individual Stocks:

$AAPL – Apple had their dog and pony show and just as expected, didn’t announce anything all that interesting. Minor updates to OS X and iOS and a music streaming service that will no doubt prove as wildly successful as their two-year old iTunes radio. What? You never tried iTunes radio? Yep, exactly like that. Apple is a handset maker and as long as the iPhone continues to sell well, you can ignore the iPad, iWatch, iTV, iRadio, iStreaming, iMac, iCar, and all the other side projects they have. The stock lives and dies by how many phones they sell. Which is why the most noteworthy development t0day was ATT’s decision to stop offering subsidized phones through the Apple Stores. This will be especially critical if other carriers follow suit. Between the slowing evolution of new must have features and the end of phone subsidies, we could see the phone upgrade cycle stretch from two-years to three-plus as consumers have to pay more and get less in return. Since the global high-end smartphone market is saturated (those who can afford a $600+ phone already have one), a slowing upgrade cycle will be a big headwind once the iPhone 6 upgrade surge runs its course. While not a today story, it is a material concern for long-term owners.

$FEYE daily at end of day

$FEYE daily at end of day

$EBAY – Ebay was smacked down by the broad market and shows why it is risky to chase a stock extended from the breakout. But in spite of today’s nearly 4% dip, the breakout is still intact and isn’t under threat unless we fail to hold $58.

$FEYE – FireEye had a strong open but gave up those gains through the day under the weight of the weak broad market. The breakout still looks good, but with a sky-high valuation it is subject to more volatility if the entire market hits a rough patch.

$ALGN – Everything I said about Ebay equally applies to Align, even coincidentally enough, the $58 price level.

It seems like the broad market and individual stocks could see some near-term weakness, but this will be yet another buyable dip. Those with stock should buckle down and prevent their emotions from getting the better of them. Those with cash should remain patient because we will likely see better prices in coming days.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN

 

 Posted by at 10:42 pm on June 8, 2015

Is it Time to Sell?

 End of Day Analysis  Comments Off on Is it Time to Sell?
Jun 042015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

The indecisiveness continues as yesterday’s attempted breakout becomes today’s breakdown. Early strength on Wednesday convinced many the market was finally ready rally, but this morning’s dip under 2,100 spins the exact opposite story. Can we believe this is the start of the real selloff, or is it just another head-fake?

Cutting through the 50dma and closing under 2,100 will prove insightful over coming days. Either it triggers an expanding wave of emotional, technical, and stop-loss selling, or it bounces as quickly as Wednesday’s upside breakout fizzled.

The thing to be careful of with these intraday moves is they are primarily driven by the small subset of day-traders. What they lack for in size, they more than make up in volume. But their limited account size prevents them from driving sustainable moves. While they can kick things off, they don’t have deep enough pockets to keep them moving. Only big money managers have the dollars behind them to keep the ball rolling. And so far this year big money hasn’t flinched following these countless breakouts and breakdowns. When the institutional bulls stay bullish and the institutional bears stay bearish, every attempted move fizzles and we quickly return to the status quo.

To answer the original question on if we should believe in this breakdown, it all comes down to how stock owners respond. Is this selloff dramatic enough to spook previously confident bulls that ignored every other attempted breakdown this year? Is there something bigger this time? In my opinion, it really feels like this weakness is more of the same and is just as likely to bounce as all the other failed breakdowns this year. (For those pointing to the imminent collapse of Greece, read yesterday’s blog post for my analysis of that situation.)

While today’s dip didn’t feel like capitulation and we likely have a little more downside left, we should be getting ready to buy the dip, not joining in the herd’s emotional selling.

EBAY daily

EBAY daily

Individual Stocks:

$AAPL – Apple’s selloff today was less than the market’s and shows owners want to continue holding ahead of next week’s developer conference. The thing to be wary of is if this turns out to be a buy the rumor, sell the news event. There is no reason for the long-term holder to worry about these minor gyrations, but a more nimble trader could take profits ahead of the conference and buy back in at a discount a few days after.

$EBAY – Ebay’s breakout is on firm ground as it bucked the broad market’s weakness and finished in the green. That strength tells us this breakout is the real deal and we should keep holding.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY

 Posted by at 7:56 pm on June 4, 2015
Jun 032015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was another meaningless day for the market as it remains stuck in neutral. The S&P500 finished inside a 20-point range for the seventh consecutive day. While some claim this is boring, listless trade. Reality is a lot of passion is hiding under the surface. Given the headlines out of Europe, Asia, Fed, and our economy, plus stocks at record levels, there are few traders yawning from boredom. Most are passionately arguing their opinion that this market is either overvalued and on the verge of crashing, or in the early stages of another 90’s style bull run. The market isn’t idling in neutral because nothing interesting is going on, it is stuck because bulls and bear are pulling so hard from both ends.

If we listed of all the reasons this market should selloff, it would take several sheets of paper. But I suspect most would struggle coming up with more than a handful of fundamental drivers for us to continue rallying. Yet here we are at record highs. For many investors, this obvious skew is all the reason they needed to dump their stocks ahead of the imminent correction. But as the contrarian, I’m left wondering why this market is so strong when the news is so obviously bad. The thing most people forget is markets don’t trade news, fundamentals, or technicals, they trade opinions. No matter how bad the news, if we run out of sellers, prices rally. Opposite is true when we run out of buyers. Trade people, not news.

A lot of the reasons we keep stalling above 2,120 is because those with cash are afraid of Greece dropping the Euro. We’ve been conditioned by years of articles about what a disaster that would be. But here’s the thing, markets are only vulnerable to the unknown. Since every wannabe investor hanging out in Starbucks is talking about what’s going on in Greece, we can safely ignore it. That doesn’t mean these events won’t drive near-term volatility, but that we can take comfort in knowing it won’t cause the next market meltdown because there are so few left to sell the “surprise” headline.

I’ve been constructive on this market for a while, but stalling near the highs for over a month is a concern. Those with cash are not in a mood to buy because they are afraid of Greece, rate hikes, and a sluggish economy. But clouds of uncertainty always dissipate and the best time to buy is when everyone is most uneasy. The biggest bullish catalyst in front of us, and yes I said bullish, is Europe finally kicking Greece out of the Euro. By the time traders realize Greece is the catastrophe that never was, it will be too late to buy the dip and all those reluctant buyers will be forced to chase this market higher. Long-term investors should ignore all the noise, but more nimble traders can make money buying discounted shares from panicked owners if prices stumble in the near-term.

Individual Stocks:

$AAPL – Lacking any headlines, AAPL is mirroring the indexes. There is a chance we could see a small pullback next week after Apple fails to announce anything new and exciting at its developers conference. But the disappointment will likely be short-lived.

FEYE weekly

FEYE weekly

$EBAY – It was a flat day for EBAY as it continues digesting the recent breakout. But the longer we hold above the breakout, the more likely it will stick and continue higher once all the new-high profit-taking is behind us.

$ALGN – Added nicely to its recent breakout. The big psychological and technical test will come when it runs up against $65, a level it failed to overcome at the start of the year. While we should expect a pause, or even pullback, as many sell and short the highs, there is no reason to join the selling as long as we stay above the buy-point.

$FEYE – Keeps edging higher, but this one has a longer road to hoe since it is well off the highs. It will continue to encounter selling pressure from regretful owners as it climbs higher, but this recent breakout pushed us clear of the post-IPO consolidation and all those buyers are now sitting on profits. While we are still 50% off the highs, most owners are sitting on profits and more comfortable waiting for higher prices.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN

 

 Posted by at 5:24 pm on June 3, 2015