Today we saw a few stocks of the highly shorted, laggard variety heat up a little bit, notably Molycorp.
Major US indices finished with modest gains Monday as investors wait anxiously for any word about fiscal cliff negotiations. The Nasdaq was the strongest index, finishing 0.3% higher. Today's gains were enough to lift the Dow and S&P to their highest point since Election Day. It feels like investors expect a fiscal cliff deal to get done, but do not expect that compromise to be reached until the final hour. Given that expectation, and suggestions by Treasury Secretary Tim Geithner that the While House may be willing to go over the cliff before a budget is reached, it makes sense that the market would have a tough time getting momentum in either direction right now.
Despite the market's relative quietude, there has been some action in select stocks.
Today we saw a few stocks of the highly shorted, laggard variety heat up a little bit. The most notable was perhaps Molycorp (NYSE:MCP), the rare earth metals company that has been leaking lower for the better part of the last two years. The stock topped out at $79.16 on May 3, 2011, and since then has lost nearly 90% of its value. However, some traders got involved today early when they noticed some elevated volume. MCP ended the day up 19.7%. Could this move be a result of the January Effect?
Another stock that Marc Sperling tweeted about earlier today was LinkedIn (NASDAQ:LNKD). LNKD broke out of a beautiful bull flag this morning and is trading above all of its key moving averages on the daily chart. LinkedIn is the social media company with an actual proven business model and it has been able to surpass Wall Street's earnings expectations at nearly every turn. I think LNKD could soon test the high of $115.40 from November 2, which was the day after its earnings release.
If you were following Apple (NASDAQ:AAPL) closely last week -- or over the last few months -- it may feel like the market is under a lot more pressure than it actually is. Today, the stock opened lower and was able to rally to positive, but momentum petered out from there. The broader market resilience in the face of AAPL's weakness can be viewed one of two ways: 1) A bullish sign that the market has been able to hold up despite the fact that its most valuable company’s stock is breaking down, or 2) A bearish sign and perhaps a harbinger of things to come for the rest of the market. Right now, until proven otherwise, we feel you have to side with option 1.
Many traders are paring back their expectations for December given the decreased volatility, and I think that approach is prudent. As traders, we are at the mercy of the market and you need to know when risk of spinning yourself around outweighs any potential reward. It's fine to be at your desk screening for plays like MCP this morning, but if you don't feel like you have an edge, you have to learn to sit on your hands. In this business, patience and discipline are priceless skills.
Scott Redler is long JPM, GS, BAC, FB, INTC, YHOO. Short SPY.