Bringing Back Individual Stocks

By Jani Ziedins | End of Day Analysis

Jun 01
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was another range-bound day for the S&P500 as we bounced off 2,100 support in early trade, but failed to clear 2,120 resistance. Volume was light, but not all that noteworthy given we are slipping into the slower summer trading season.

Previously I was expecting an upside breakout, but it concerns me that we cannot get the job done. There is a fuzzy line separating a healthy consolidation from far less productive stalling. We’ve been struggling with 2,120 resistance since late April and the market’s inability to build on May’s breakout exposes a material lack of demand every time we creep up to highs. While every selloff bounces because confident owners refuse to sell their stock for a discount, those with cash are proving just as stubborn.

At this point I can easily agree with both the bull’s and bear’s point of view. Meaning this could as easily break one way as the other. Sometimes we have to admit we don’t have an edge and simply wait for the next trade. No doubt this will either surge higher, or plunge lower, but I would be flipping a coin if I tried to predict which one given all the contradictory signals coming from the market. As a trader, sometimes the hardest trade to make is to not trade.

Individual Stocks:

$AAPL – Apple is just as range bound as the S&P500, currently stuck between $125 and $132. While the developer’s conference is right around the corner, it’s been a long time since a big announce hasn’t leaked out ahead of time. Don’t expect headlines to trigger the next breakout/breakdown and AAPL’s destiny largely lies in the hands this broad market consolidation.

EBAY weekly

EBAY weekly

$EBAY – While rumors of a Paypal spinoff have been around forever, we are quickly approaching the day when it will become a reality. Since traders largely expected the spin-off, the acquiesce by management failed to triggered a large upside move, but in recent days the stock finally broke through $60 resistance. It repeatedly stalled at this level over the last two years, and while that could easily happen again, this time feels different. Keep an eye on this one. Ideally it will stay above $60, but all bets are off if it slips under the 50dma.

$FEYE – Cyber security is making a strong case to be the next big thing and is what propelled FireEye near an eye watering $100 last year. But like every other premature, overhyped story, the air quickly came out of this one too. The stock fell nearly 75% as momentum traders threw the baby out with the bath water. While fear drove many to sell at huge discounts, the cyber security story is real and the stock is making a comeback, up nearly 100% from the lows. More recently it cleared a cup with low handle on strong volume. This pattern has a higher failure rate given the larger number of traders praying to get out at breakeven, this presents an interesting opportunity for the courageous trader. Just like EBAY, it would nice to see the stock hold $45, but we really have to question the sustainability of the breakout if it slips under $42. Because of the high beta nature of FEYE, it is way too dangerous to hold it through a market dip. Bail on this trade if the S&P500 starts breaking down. There will be plenty of time to buy back in later.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, 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 children.