World markets are mostly red overnight with Europe down almost a percent and Asia got hit pretty hard. Shanghai is down 0.67% but the Nikkei is having another bout of extreme weakness, down 4% as
the Yen hit six-week highs.
S&P futures are down 5-7 handles giving some downside follow-through to yesterday's break of the 1698-1702 actionable pivot. Yesterday did give some reasons to take off some risk for the intermediate-term active market participant. If you were looking for cues to get short, yesterday could have provided a small inflection point. It seems like IBD tweaked its big picture section as they went to rally under pressure a bit quicker than in the past..
In order for the Bears to keep some control they can't let the bulls reclaim the 1698-1702 area. Support stands at the 21-day around 1682ish and then 1671 is a bigger spot. We will measure the next few sessions to see what type action we could see in August. Nobody truly knows, but if you made adjustments around that pivot you have some flexibility. I don't think the highs of the year are in, but some volatility will be nice.
There has been lots of nice stock action as this earnings season has provided us with multiple set-ups for action.
In today's Morning Call we will go over some stocks that showed some relative strength yesterday.
eBay (EBAY) had a big gap down on July 18 after the company missed its earnings estimate then dip buyers stepped in at the $51 area to contain the sell-off. The stock built a base at this level for a few sessions before seeing a spirited move yesterday that brought it back above all key moving averages. The stock showed some relative strength yesterday. It could try to fill the earnings gap at above $53.92.
Michael Kors (KORS) spiked higher at the open yesterday after the luxury retailer posted earnings that nearly doubled. It sold off together with the broader market in the morning, but met some buyers at the upper level support of $67.85 and saw a strong rally off of lows. Holding above prior pivot high of $69.23 would be constructive for higher prices moving forward.
Mastercard (MA) absorbed debit card fees limit news that created a wide trading range in both MA and V last Wednesday. Yesterday MA tacked on another 1.80% after flagging at highs for two sessions. It looks a bit extended on the daily chart now and hard to chase, but its relative strength is something to notice. Some work above $640 to allow the key moving averages to play some catch up would be healthy for higher prices.
Workday (WDAY) is a new issue that has a constructive looking chart. It saw a nice break out at the $70 level on Friday after grinding higher for almost two months. It's now flagging nicely at highs showing healthy digestion of the potent break out. The stock also showed some relative strength yesterday. We now have an upper support of $72.19 to trade against.
Some mixed action in tech
Apple (AAPL) had a small Red Dog Reversal at $470.67 yesterday as we talked about how it did look a bit extended from the short-term moving averages. It still looks good as it's trying to build a base at the $462 area. Next bigger support / buyable spot is $457ish.
Netflix (NFLX) held up well yesterday as it did sell off with the market in the morning, but held the recent pivot level of $250 and bounced. The stock closed well off of lows and posted 0.81% of gains showing relative strength. Look for potential upside follow-through above $257.60 if the market continues to hold.
Amazon (AMZN) is hovering around its 21-day MA and put in a long bottoming tail after it held the upper support of $297 yesterday. A move through $302-303 could help it penetrate through the short-term downtrend since July 26.
Google (GOOG) was on our radar yesterday for a move through $907. It tried and failed and is a bit sloppy. I'm going to stay away until it starts acting better. Holding above $880 would be constructive, but a break below that level could add some pressure.
Baidu (BIDU) has been acting better since early July and further re-energized after earnings. It has some support around $130ish with a major gap support around $120ish.
Facebook (FB) has been super strong since earnings and could use a break. Yesterday's low of $37.94 is a point of reference. The 8-day stands at $36.53ish.
LinkedIn (LNKD) is building a nice flag above its earnings gap, with $228ish being the level to trade against. A move above $235ish could set it in motion.
VMWare (VMW) is building a nice pattern above its earnings gap. The $83.50ish pivot is the level for action if it can power through it.
First Solar (FSLR) came out with very weak earnings last night and is getting beat up. The $40ish pivot is some bigger support to watch.
Tesla (TSLA) has been a great stock on all time frames. Earnings are after the close. It is priced for perfection so I'm going to wait until after the number to trade it.. I'm probably not doing an option strategy here like I did into earnings with GOOG, AAPL, FB, and LNKD. Historic highs for after hours is $146.
Bears have the ball a bit here, but if we close back above 1698-1702 it will be a very quick set of downs..
*DISCLOSURES: Scott Redler is long IBM puts and Short SPY.
- Information Technology