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Minyanville's T3 Morning Market Call: Bid Returns to Market After Slow Start to Q2


High beta tech continues to be choppy and lacks leadership. Banks are still struggling a bit after leading the charge at various points over the last few months.

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After a slow start yesterday to the second quarter, S&P (INDEXSP:.INX) futures are up about seven handles this morning, following the lead of most world markets. European markets are up around 1%, although Japan is down another 1% and 3% in two sessions, but it was up almost 20% last quarter. Yesterday the S&P held the upper range despite the underwhelming action. But that's been the story recently. Upper level support is 1558-1562, with pivot resistance at 1570-1576.

Although losses in the major indices were contained yesterday, there were more faulty signals. The small-cap Russell 2000 Index (NYSEARCA:IWM) and Transports (NYSEARCA:IYT) had potent moves to the downside. Today's action will be interesting with the positive tone in the futures. Is this another short trap, or do both those sectors go red today and get some downside follow through, which has been tough to find to the short side. Right now, weakness is a reason to potentially lighten up on longs, but not necessarily press shorts.

High beta tech continues to be choppy and lacks leadership.

Apple (NASDAQ:AAPL) unfortunately remains only a "trading vehicle" but has lost its "swing commitment." The complexion of the stock really changed when it broke below $681ish many moons ago. Since then, there have been some "tradable bounces" but each one gave way to more selling. Two weeks ago, AAPL broke its macro downtrend and looked like it could stage a bigger bounce, but over the last few sessions the stock has traded back down near pivot lows. Goldman Sachs removed AAPL from its conviction buy list this morning. Yesterday's low is $427.74 and recent low back from March 4th is $419, which are the key levels to watch.

Google (NASDAQ:GOOG) showed some relative strength as it held above its 50-day MA. The 8- and 21-day MAs, however, are curling down around $805-808. Traders will watch to see whether GOOG can reclaim them or gets rejected by them.

LinkedIn (NYSE:LNKD) was upgraded yesterday and went negative. It's holding the 21-day, but showing some erratic action up here after a monster move. Make sure to know your commitment level if you are long. I think you could have a high level stop in around $172.20. If that breaks, there might be a cute short setup.

Netflix (NASDAQ:NFLX) is also, like LNKD, showing some erratic signs at upper levels. It failed to break out last Wednesday and now is back in a range. Use $181.47 as a pivot today, and then the 50-day is down at $174.43.

Amazon (NASDAQ:AMZN) retreated yesterday and was rejected by its 50-day. See if it can stay above $260.

EBay (NASDAQ:EBAY) had a monster two-day move back almost to highs. See if it can hold yesterday's gap and set up again. The key level to watch is $55.44.

Sprint (NYSE:S) still grinds higher and looks good as a position to hold.

Hewlett-Packard (NYSE:HPQ) had another "RedDog Reversal," this time from a higher price. Will this lead to a pull in? Use $23.26 as a spot to potentially add more shorts if that is your cup of tea.

3D Systems (NYSE:DDD) has been a nice trade since breaking above $30.30. Now it's near $34.50, so trim and trail if you are still involved.

Banks are still struggling a bit after leading the charge at various points over the last few months.

Goldman Sachs (NYSE:GS) is weak and is hanging onto upper pivot support by a thread. You can trade GS against $144.60, but if that breaks maybe the banks go lower.

Morgan Stanley (NYSE:MS) has been the weakest on of them all. If it breaks $21.52, you could potentially short it to fill the gap that started in mid-January.

I'm a bit flat-footed here, not seeing great long setups but not ready to lean short. I will be actively trading a bit more for the next week or so until I have more clarity. With many high-beta stocks showing exhaustion at upper levels or struggling to hold onto upper level support areas, now might be a good time to put some money to work in more value-oriented names like Procter & Gamble (NYSE:PG).

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Scott Redler is long SPY, S, BAC
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