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Apple, Netflix, Amazon, Qualcomm, FireEye: What to Watch for Next


An analysis of some major stocks and indices through the lens of DeMark indicators.

I waited until Sunday evening open in the futures markets to pen this so that I could see if Friday's palpable worries around the Ukraine situation would carry over, or if last week's concern would once again dissipate. With the futures exactly unchanged it looks like both bulls and bears remain wondering what comes next for the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX) and Nasdaq (INDEXNASDAQ:.IXIC) stock market indices.

No such paralysis in corporate credit however, which ended yet another stellar week on the way to completing another exceptional month. 
Not only the April's issuance tally will close comfortably above the $150 billion mark (for the second month in a row and during a seasonally slow time), but rates, spreads, US CDSs, US financials' CDSs, EU sovereign and financials' CDSs, and China-sensitive CDSs, are all at or near the best levels since 2009.

That leaves stocks to fend for themselves, with the dynamic of companies buying back stocks while everyone else is selling them firmly in place. (See The Pundits Are Wrong: The Bull Market Is Not Over Yet.) The recent carnage in some names has been remarkable but hardly surprising. I'd argue that it was far more puzzling to see the Netflixes (NASDAQ:NFLX), Amazons (NASDAQ:AMZN), and Workdays (NYSE:WDAY) of the world trade in the ether than to watch them boomerang back to Earth. But away from the bubbles in social media and biotech stocks, and from Tech Bubble 2.0 in general, (I will loosely define "bubble" as prices that will not be justified by the companies' business for... ever) stocks are actually behaving rather rationally, with good results, solid cash flows, and strong balance sheets from the likes of Apple (NASDAQ:AAPL), SanDisk (NASDAQ:SNDK), General Electric (NYSE:GE), and Gilead (NASDAQ:GILD) being rewarded, while good results from already pricey names like F5 Networks (NASDAQ:FFIV) are met with a yawn.

With the credit, macro, and micro variables tugging in different directions, my sense is that confused traders are turning more and more to the charts to "guess-ticipate" the next move, so I will add my two cents to the discussion by looking at some names through the lenses of DeMark indicators.  (For those not familiar with DeMark analysis, see my brief primer: Interpreting DeMark Indicators: All Trends Must End, but the When Is Key.)

S&P 500
Using the pit-traded contract as reference, yhe daily active "Risk Level" at 1881.30 continues to work as resistance, while it remains to be seen if Friday's bearish "price flip" is the beginning of a down move in the context of a bullish trend. Meanwhile, nothing on the weekly chart will turn markedly bearish until price breaks the current TD Reference Close Down at 1811.70.

A somewhat different story here. The daily chart still shows an active "qualified break of TDST Level Down," and that bearish posture is confirmed on the weekly chart by a 7 count on the TDST Buy Setup. 

Following a Perfected Sell Setup signal on Thursday, Friday printed a "price flip" on the daily chart and the price closed below TD Reference Close Down. A lower open and lower low on Monday morning mark a distinct change of character. The weekly chart satisfied the qualified TD Propulsion Exhaustion Up target at $78.34 and is still within an active TD Sell Setup signal. Depending on your trading time frame, this ticker looks ready for a near-term pullback or at least a longer-term pause.

The post-earnings shelling has dropped it hard and fast enough to suggest a bounce may be in the offing. The daily chart shows a TD Double Up Arrow and bar 11 of Combo Buy count, both of which suggest selling exhaustion may be near. All bets are off, however, about whether the weekly TDST Level Down at $295.26 is broken on a qualified basis.

Zillow (NASDAQ:Z)
On Friday I took a "timid" bearish position using a "put butterfly." It was triggered by a "price flip" off of a daily Combo Sell signal and by the fact that the company's business and its stock valuation are only vaguely connected by vapor. On a weekly basis, bears still have a lot of work to do before anything meaningful takes shape.

While I see the appeal of this part of the tech space, at $95 per share, the fundamental / valuation argument simply did not exist -- not for this year or the next 10. Companies simply do not grow into 35x "price to sales" ratios; even at the current 10x FY '15 P/S, "lunacy" is probably an appropriate adjective. That said, the daily chart printed a Combo Countdown Buy on Friday with "risk level" (i.e. sell stop) at $37.60. The weekly TDST Level Down also provides some extra support at $37.49, and weekly TD Alignment at -4.00 (a concoction of DeMark oscillators) is quite oversold. If weekly TDST Level Down is broken on a qualified basis, the next bottom is... nowhere to be seen yet.

Qualcomm (NASDAQ:QCOM)
An ugly reaction to tepid numbers masked two consecutive daily TD Camouflage Up bars (i.e. accumulation bars). As long as daily and weekly TDST Level Down at $74.74 and $70.98 remain intact, this one may be looking more at a sideways / choppy period than any drastic drop. I like selling weekly puts and calls around my long on this one.

It has blown through the daily TDST Level Up, and it's only a matter of time before the break qualifies and lays the groundwork for the completion of the daily Combo Countdown Sell, which currently is only on bar 4. The weekly chart printed a bullish "price flip" on Friday, but it's too early to read much more into the indicators. What jumps out on the Apple chart is the weekly Cup & Handle pattern; if that is broken to the upside, it projects to $740. Incidentally, before her tragic death early this year, Tracy Copple (a/k/a Madison Montana) made a call of Apple back to the highs in 2014. "MM" was far and away the best fast-money trader I ever ran across, but what made her even more special was that she could also see longer-term patterns and had the patience to stick with them. 

When Apple revisits the highs, that one will be for you, Madi.
Twitter: @FZucchi
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Positions in AAPL, QCOM, Z, XOP, SPX, GE, GILD, and SNDK.
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