Can Traders Short This Up Open?

T3 Live

Live in South Florida? T3Live is hosting an exclusive trading education event in Boca Raton, FL on April 26th and 27th. The event at the beautiful Boca Raton Resort & Club has limited seating, so sign up today.

S&P futures are up 8-10 handles this morning as European markets bounce back from oversold levels. Japan is also actually near or at year-to-date highs as they didn't get as scolded much as some would have thought at the G-20 for their devaluation strategy. Traders looking for lower prices would not want to see a close above 1563-1575 in coming sessions. Pressing directional moves has been tough.

If you did cover some shorts into key support you have the luxury of potentially testing some shorts into the bounce back. In the same vein, if you sold some excitement into the move above 1575ish, you had the luxury of testing some longs on Thursday and could probably book some into this up open. These are all medium-term type tactical plays if you use a very active approach. By the way, they are not easy to execute on.

Last week was an interesting one. The S&P wasn't able to sustain its breakout above 1573 as it reached 1597 but couldn't hold higher. On Thursday the market had a successful test of its 50-day moving average, which also is a very defined support area that markets are watching in the 1536-1540 area. This could also be deemed the neckline if the right shoulder builds in coming sessions.

There has been a rolling correction in various sectors but the S&P has held up much better. In the last two weeks lots of sectors did correct almost 5% from their highs and broke their 50-day moving averages. The key in the coming sessions is whether they get rejected by them or reclaim them.

The Russell 2000 ETF (IWM) has resistance around $92.23.

The Transports ETF (IYT) has resistance around $108.50-109.50.

The Homebuilders ETF (XHB) has some resistance around $29-29.50.

The Financial Sector ETF (XLF) has some resistance around $18.25-18.50.

The Nasdaq ETF (QQQ) has some resistance around $68.50.

Metals snapped back a bit after hitting lows last week. Gold (GLD) hit $130.50ish and now is opening around $138.50ish. It's in the gap that goes all the way up to $143.25, and then $145.50 is the next resistance spot. Be careful blindly shorting an up open as this commodity got stretched very far to the downside. But there is obviously some room here.

Tech continues to be mixed.

Google (GOOG) responded pretty well to earnings. It broke its descending channel and now needs to stay above $790ish to stay constructive.

Microsoft (MSFT) gapped up and didn't go anywhere. If it can stay above $29.60 perhaps it could act better moving forward.

Intel (INTC) has been acting much better since earnings. It needs to stay over $22ish to stay in the game.

IBM (IBM) is now in the penalty box for a bit with a huge gap to use as a pivot at $196.50. Friday's low is $189.76.

eBay (EBAY) also didn't report enough to sustain the move off last month's lows. I'd give it some time and $50ish could be a magnet.

Netflix (NFLX) is near big support of $159ish, see if it holds that.

LinkedIn (LNKD) acts better than most but probably won't have a big move until earnings.

AAPL has earnings on Tuesday and will get a lot of attention this week. It seems like everyone has taken their estimates and targets down a few notches for AAPL. The last pivot was $419ish, which broke last week. The stock has been battered and bruised, and now the question is, has it been battered and bruised enough? Many have thought that over the past few months and been wrong. Here are some thought from JP Morgan on AAPL:

"AAPL itself reports earnings Tues Apr 23 after the close and expectations are pretty subdued (and seem to be falling every hour). The St is modeling (as of Thurs 4/18): revs $42.485B, GMs 38.5%, OMs 29.6%, EPS 10.07, tax 26.19%, iPhone units ~35MM, iPad ~16-17MM, Mac ~4MM. For June, the St is modeling revs $38.907B, GMs 38.81%, OMs 29.31%, EPS 9.08 (nearly every preview says we expect AAPL to guide June below the St ). Many people increasingly think AAPL could announce an updated capital return strategy in conjunction w/earnings on Apr 23. In terms of anticipation, the 1) base case expectations on capital: a dividend yield of at least 3.25% w/$7.5-10B of annual buybacks; 2) upside case on capital: a dividend yield of ~4%+ and/or a large 1x special dividend (similar to what MSFT did years ago) coupled w/an ongoing yield of ~3.75%+. Buyback pace of $10B+ annually; 3) downside case on capital: a dividend yield of less than 3% and an unchanged buyback."

I will go over what I'm doing with AAPL a bit later in a video.

I did put some S&P 500 ETF (SPY) short back on at the close Friday, and will see if I can add some on the open. I'm thinking that this could be the right shoulder" potentially building but I don't have extreme conviction. I will measure the action the next few days. I went from portfolio approach last Monday back to tactical.

I think macro investors are just fine as I don't think the highs of the year are in (I also don't think this is 2007). The question is, do we see lower prices before resuming the macro uptrend? That is what guys we will be trying to measure this week.

*DISCLOSURES: Scott J. Redler is short SPY

View Comments (0)