Market Taking a Breather, GS Breaks Out

By: Brandon Rowley  

S&P 500 fades after gap up, flirts with trader's 1,100 level

The S&P closed down 42 basis points after gapping higher about 60 basis points. Today was the market's third day of a pull-in after its impressive 6% surge in five and half days. Traders are all watching the 1,100 level to see if prior resistance becomes support. The level generally held today by dropping below in the morning but recovering into the afternoon. I'm really not too concerned with this level, I would be willing to give stocks to the 1,075 level before becoming worried about a failure.

All eyes are on tomorrow's Advance Q2 GDP number due out at 8:30 AM. Tokyo is currently taking a dive down 1.47% following the US lower and seeing some disappointing economic data. Yet, I don't think Europe or Asia will dictate tomorrow's action. Economists are predicting a 2.5% reading for Q2. The Advance number will likely be very similar to the Q1 growth of 2.7% as it is based on incomplete data weighted towards measurements from early on in the quarter.

My guess is that the market will wildly overreact to this number tomorrow morning if there's a miss or beat. Emotions continue to run high and tomorrow's number will either bring the bulls out in force or the double dip crowd will grab center stage. It's fairly comical to consider the complexity of measuring a quarter of growth in a $14.59 trillion economy just 4 weeks after the quarter ends and that a 20 basis point miss could cause drastic selling in equity markets. Also consider that the number is revised twice but such is a volatile market obsessed with every data point.

Goldman Sachs (GS) starts the next wave higher

Shares of GS jumped 3.65% today in a down tape after a week and half of consolidation. Investors are realizing how undervalued shares are at just 7.7 times trailing earnings and book value at $128 per share. I have been battling the stock for 4 days now anticipating this next move higher and trying to work into a large position. GS leaped $12 when the SEC settled with the company after months of uncertainty. Now that the $550 million fee has been leveled against the firm and the hit has been taken to earnings, GS looks ready to run. The company is a cash machine with incredible growth and now short-term relative strength and momentum has kicked in. I am long with an average price of just below $150, my stop is at $147.50 and I am looking to take first sales around $160. I see the strong possibility that GS will retake leadership of this market in the next wave higher especially if tomorrow's GDP number doesn't disappoint.

Key commodities continue to show demand

While the market has been taking a breather, the key commodities I watch are looking healthy. Doctor copper is holding the $3.20 level as this week has been one of stable consolidation with a bullish tilt. Copper closed today at $3.26 as demand remains strong. Crude oil is trading down this week but mounted a strong reversal yesterday after a huge 7.3 million barrel build in crude stockpiles fueled a sell-off below $76 before it turned, rallied and then closed back above $78 today.


Disclosure: Long SPY, GS.

RIMM Product Launch Could be Catalyst

By: Scott Redler

Research in Motion has an August 3rd new product launch. Stocks tend to like to run into those type events. This stock is a laggard and acts very sluggish, but I do get a nice trade here a few times a year.



Yesterday stock acted very well with the market soft. We have a nice flag pattern
If stock can trade above 56-56.25 on big volume, I think we get a big trade to 58-59 to fill the gap short term.

Goldman (NYSE:GS) Pennant Getting Tight

By: Scott Redler

We’ve been trading Goldman stock all year. Looks ready again as the pattern gets tight. The last big buy was 138.50 and it went to 153 after hours when they settled with the SEC.



We now have a nice flag pattern. If big volume comes in, I think we can buy 148.50-149.50 for a quick move back to 151-152. Then a bigger move if market cooperates back to 155-160.

Is Pull-back Buyable Yet?

By: Scott Redler

Market had a move from 1010-1120, that’s 110 handles, 80 handles from the RedDog reversal point of 1040. Since, we have pulled in about 17 handles off the highs. Was that enough? Today the futures are up as Europe is at 12-week highs. The first hour will be crucial to see if they can take Futures negative and give us a trade
Down to 1098-1102 then perhaps the major support at 1087-1092. I was tier 4 SPY at a few points yesterday but only took home Tier one as 110.60 quick trade objective was met.

TECH is very mixed
AAPL gave us a quick two-day move and then sluggish action hit the stock. I am flat now. I bought 260 added 264.80 and then sold my position as it went negative yesterday. I will see what happens today.
VMW broke upper range and the stock needs to hold 75-76 to keep superior technicals.
BIDU had a small pull in. Stock needs to hold 76-78 which was our last buy point.
SNDK had a four day bounce off 40. Now it’s not compelling.
AMZN pattern is getting tight, they saved it after earnings. Now the downtrend is my new pivot action area. I do think one day we will get a nice long here. Keep on radar for big volume. Right now my price point is 118.50-119.
RIMM this laggard has been a messy stock is acting well here. Stock was up yesterday in a down tape. I do see a nice flag pattern. I am long and will add if we can get a volume move through 56-56.50 for quick gap fill to 58-59. They have a August 3rd new product day, which could be a catalyst.

NFLX was nice short for some as it broke 101-102, the next big area of support is 94-97

BANKS are holding okay
GS tight pennant forming. Can it break to upside? I am long small and will add through 149 if we get a strong volume move.
MS holding earnigns gap, but choppy, no real price points.
BAC has been a laggard, but could get back to 15 if market holds in.

CASINOS
LVS from 22.75 and then we sold yesterday around 26. Stock held tough and is in game for new highs at some point
MGM held in okay above 11.30-11.50 stock could see $12.40-$12.60.

AGS are acting okay
POT was very sloppy yesterday. It gave us a decent trade. But I didn’t realize it had earnings this morning. So I only took home small. Stops are 97.
AGU looks okay with pivot 60.50.

Gold gave me a decent trade yesterday from 113.20 to 113.70, and is still very sluggish and could take more time.

Eat Like a Pro

After competing in this years New York City triathlon my good friend Mike Lee, who is one of T3Live's top traders shared with me what he had for dinner last night.

He said, "it was the best meal of my life."
I thought I would share it with you as it is quite honestly one of the most unhealthy dinner receipts a person can have.

1 Double Cheeseburger
1 Cheese Fries
1 Cheese Dog
1 Chocolate Milk Shake

What's also amazing is that he washed it all down with some more ice cream after dinner.

Planting the Seed in POT

The agricultural stocks have been looking better and POT is looking like it is headed for higher prices. The chart pattern looks excellent and our buy area is between 98.00-98.50. Our short term target area is 103.00-105.00 and our longer term price target is 110.00.

Looking for the Re-Test

By: Scott Redler

The market just had a very nice calculated move back to 1120, about 110 handles from the 1010 low and 80 handles from the 1040 RedDog Reversal. The oscillators are very overbought and we could be in the process of working this off. The S&P might just trade in this new upper level of 1109-1120. I would like to see a move through Yesterday’s low for a nice “trading short” back to test 1095-1103 area. (I am short Tier 2 SPY) I will add if we get a 15 minute close through 111.11. I do think that would potentially be a dip to buy if the “re-test” is successful.



TECH
AAPL was a great trade for us yesterday thru 260.50. The action was sluggish though. I have tier one left, if it were to go through yesterday’s high of 264.80 I will add more for a cash flow trade to 267-269 on a micro level. But I will watch price action close.
BIDU was a great trade thru our price of 76. It did stall a bit in front of new highs of 82.29. I would love to see a rest then a nice trade thru that pivot high.
VMW, our stock of the year, continues to impress. We’ve had great entries and trades here. With a Red Dog reversal entry on July 1st around 62.27. It is a bit tricky up here for “traders” trying to put a new upper level. Needs some time
AMZN had an impressive move to take back the earnings gap. The more I read into it, the more I wish I had entered that night. Some say miss is due to adding fulfillment plants and hiring. With time we will have a nice trade through this downtrend that does stand around 117.50-119.50.
RIMM is trying to set up again. Some news of a new product release August 3rd. It could be a laggard buy here around 53.50-54 but needs to clear 56 for momentum. If you buy, put a stop in at 52.
NFLX crushed earnings, but no bounce yet. It's creating a lower floor to trade against 101-102, if it breaks could see another leg down to 94-97.

BANKS
GS gave us a few good trades starting at 138.50 now it seems to be flagging. This new mini range is 144-147 see how it handles this area.
MS holds gap from earnings but no new action yet, 26.44-27.50 is the new range.
BAC is a laggard I would stay away.
JPM could use a rest.

CASINOS
LVS reported decent earnings, not sure if it is enough to be a catalyst higher. Our last buy was 22.75 if your still long. Take some profits around 26.
MGM last buy was 9.20-9.40 it’s now 11.30. I think easy move is over there. I would take some profits if you still own it.

FCX was off yesterday with earnings from X. 68.50 needs to hold, if not then 65.
X had lacklustre earnings, and the stock could have got hit harder but did not. Watch 45 as support.

GOLD, we got stopped out of our GLD at 199.77. I am now looking for some trading opportunity here. We can see a RedDog reversal through 113.21 if it transpires. Or we can see how it handles the 200-day around 112. My gut tells me they break the 200day at some point to steal all the stock by triggering a ton of stops. THEN we get a great entry for a trade.

Daily Watch List for Wednesday, July 28th

Wednesday's installment of the Daily Watch List by Gregg Riek and Dylan Deans available to all subscribers of T3Live.com's Virtual Trading Floor every day!

Click the image to download the PDF.

Rally Pausing, BA Beats on EPS but Misses on Top Line

By: Brandon Rowley  

Market up again, traders cautious for pull-in

Tokyo had a blow out day up 2.7% and the Shanghai followed with a 2.3% gain. Europe was more muted with a mixed session. US futures are bouncing around breakeven as of right now after some data on durable goods orders showed a decline. Boeing (BA) reported earnings this morning beating with EPS of $1.06 versus $1.01 consensus. BA missed on the top line falling short of the $16.1 billion expectations at $15.6 billion. Guidance for EPS and revenues for the fiscal year 2010 both came in below expectation. Yet, BA is trading down a marginal 24 basis points pre-market. It will be interesting to see how the market reacts to the revenue miss and lower guidance.

Lightening into rally, holding most

I am selling some of my longs into this multi-day move higher as the S&P 500 is up 4.6% since last Monday. My goal though, is to follow the advice of High Chart Patterns and "trade around the base". I believe in the long-term bullish story so I am trying to sell into strength and buy on weakness until further notice. Sometimes I do this well, other times not so well but being active on the margin keeps me in tune and aware of any changes in market conditions.

My "Put Your Rally Caps Back On" article this weekend was well-received in the online world and I was featured on Yahoo! Finance! The guys over at Wall St. Cheat Sheet run an excellent website and helped promote the article. Some of the comments I received were priceless. My favorite: "This guy is an idiot and we are all dumber for having read his garbage. He probably wrote this while wearing camoflage garb in Wal Mart." In fact, I did have camo on!


Disclosure: Long SPY.

The Next Macro Buy Area

By: Scott Redler

In this market the only way to stay with a trade is to have the right entry and exit.
I attached the chart of the S&P with the areas that served us well, and what to look at moving forward.



THE PRUDENT ENTRIES
1) The 1040 reversal
2) 1056 was the 50% retracement
3) The push-through the downtrend at 1098

Where are we now?

We hit 1120 this morning (Last Tuesday we were at 1056) below the next major resistance area of 1125-1135. It will be important to see if we can buy back the recent downtrend break, which we call the “retest”. We did sell all our SPY today last price of 111.91 and went short SPY around 112.10, which already have been covered around 111.26 just for a cash flow trade.

I am still long in individual names based on the individual set ups that look good. I will look to buy back SPY if I can around 109.75-110.30 which would be around 1095-1102 S&P. If that holds, that will be your next entry for a macro long in the S&P.

Hey Steve Jobs, It's Time to Split AAPL Stock

By: Scott Redler

After another great earnings report, a ton of cash on hand and a slew of new market-share-dominating products, it's about time for AAPL to split 3 for 1.



Stock right now is trading very tight. I am targeting a cash flow trade if we can get through 260-262 on volume and hold. This should open a micro move back to 269, then possibly new highs.

I trade this stock every day, and every now and then there is a good swing set up. My last big buy was at 215-217. The stock has lagged lately so watch price action close.

Daily Watch List for Tuesday, July 27th

Tuesday's installment of the Daily Watch List compiled nightly by two of T3Live's own, Gregg Riek and Dylan Deans. It's available everyday to subscribers to T3Live.com's Virtual Trading Floor!

Click on the image to download the PDF!