AM: Adding to recent gains

By Jani Ziedins | Intraday Analysis

Feb 12
S&P500 daily at 1:02 EST

S&P500 daily at 1:02 EST

AM Update

The market is holding recent gains in quiet trade while AAPL is dipping in active trade.  FOSL is breaking out and setting up an interesting trade.  AMZN bounced back and is just under the 50dma and NFLX is holding recent gains.

MARKET BEHAVIOR

Stocks are up modestly this morning and continue supporting the recent break above 1515.

MARKET SENTIMENT

Things that are “expensive” usually get more expensive.  This is because people shy away from them and that means there is a larger pool of available buyers.  Contrast this with something that is “cheap” and a “good buy”.  That means everyone is already in the stock/market and there is a large pool of available sellers.  We are seeing both cases play out in this market.  The S&P500 continues higher no matter how “overbought” people claim it is and AAPL keeps going down no matter how “cheap” people think it is.  Trading isn’t about what people think, but how they are positioned.   When everyone loves something there is little demand left, when everyone is suspicious there are few sellers left.

TRADING OPPORTUNITIES

Expected Outcome:
Stick with the trend because what is overbought is about to get even more overbought.  The tight trade over the last couple days is a nice change from last week’s volatility.  Calm and stead trade bodes well for a sustainable continuation.

Alternate Outcome:
This rally will end at some point and with each passing day we are one day closer to that end.  We’ve come almost 180 points since the November lows and without a doubt most of this leg’s gains are behind us.  At most we have another 50 points left in the tank before we see some kind of larger consolidation/pullback.  Look for a material break of support at 1500 or an unsustainable surge higher to signal this rally is dying, but until then stick with the steady climb higher.

INDIVIDUAL STOCKS

AAPL is suffering a bout of sell-the-news as Tim Cook failed to deliver what speculators were hoping for.  If the justification for the recent bounce is invalid, then the trade is also invalid and traders need to get out.  Look for the stock to trade back down to recent lows if it cannot find a floor and bounce back this afternoon.

FOSL daily at 1:02 EST

FOSL daily at 1:02 EST

FOSL popped nicely and looks buyable for the aggressive trader.  The stock could dip and close the gap, but the trend is clearly higher.  Use a stop-loss near $103.

AMZN is bouncing back from yesterday’s selloff, but is still under the 50dma.  If it cannot regain this moving average on decisive volume, there could be a quick short trade here.  Either way look for a decisive break from this area and ride it for some quick profits.  Don’t get greedy and take profits early.

NFLX opened higher, but sold off by midday and is in the red for the 4th day.  But more bullish is holding support above $175.  Selling is a normal and a health part of moving ahead so don’t pay too much attention to the recent volatility as long as the stock keeps holding recent gains.

Stay safe

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.