• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

The Trader Daily

Should investors be moving back to momentum names?
By BOB BYRNE Apr 29, 2014 | 07:30 AM EDT
Stocks quotes in this article: SPY, VALE, PBR, EWZ, CIG, YELP, AMZN, BIDU, LNKD, IBM, MSFT, CLF, WLT

I want to begin this morning's report by highlighting a concern I have with yesterday's snap-back rally.

As you'll recall, everything stopped declining and began to rally between 1:15 p.m. and 1:30 p.m. Within that 15-minute window, we witnessed an instantaneous evaporation of supply in biotech, high-tech momentum, small caps, utilities, staples and energy. My complaint is that traders were unwilling to jettison their safe haven hidey-holes (durables and utilities) in favor of riskier assets. I expect active participants to maintain their sell-the-rip game plan until an undeniable shift away from safety and back into risk has been witnessed.

As far as Tuesday's SPY trading is concerned, the session is likely to be determined by which side of $187.25/$187.40 we are trading. A sustained trade above $187.40 encourages buyers to auction prices up toward $188.30 and $188.65. A failure to build value above $187.25/$187.40 would be expected to send the SPY straight back down toward $186.64 and $186.03.

15 Minute Volume Profile SPY
Source: eSignal
View Chart » View in New Window »

With Vale (VALE) being the notable exception, our four Brazilian favorites have been consolidating their massive mid-March gains. As far as Petroleo Brasileiro (PBR), iShares MSCI Brazil Capped ETF (EWZ) and Companhia Energetica de Minas (CIG) are concerned, I suspect they've got another dip coming (toward the 50- or 200-day moving averages). But I'll be stalking any such dip for a long opportunity.

VALE has been the underperformer of the group, but I think that trend may be coming to an end. I'm looking for buyers to return as the stock moves to the right of the steep declining trend line (in purple on the chart below). For those impatient few anxious to roll the dice, you could attempt to buy the stock prior to any strength materializing, using the mid-March box ($12.50-13) as your reference point.

Four Brazilian Stocks
Source: eSignal
View Chart » View in New Window »

If you traded on Monday, you already know how active the trading was in the beaten-down momentum universe. We saw massive volume spikes in everything from Yelp (YELP) and Amazon (AMZN) to LinkedIn (LNKD) and Baidu (BIDU). But was it a washout? Should investors be moving back into these names? No.

Yelp (YELP) & Amazon (AMZN) -- Daily
Source: eSignal
View Chart » View in New Window »
LinkedIn (LNKD) & Baidu (BIDU) -- Daily
Source: eSignal
View Chart » View in New Window »

Unless you are operating on a timeframe measure in hours, or at most a few days, I would avoid these stocks. The bottom line is that while the high-beta momentum universe is oversold and universally hated, many of the stocks are technically broken. Until these stocks stabilize, form stable bases and begin breaking higher, the risks associated with buying them are simply too great for anyone other than the short-term scalper.

Let's end today's report with a couple bullish charts. Because believe it or not, there are still some bullish setups in tech land.

IBM (IBM) & Microsoft (MSFT) -- Daily
Source: eSignal
View Chart » View in New Window »

IBM (IBM), a stock I've disliked for both technical and fundamental reasons for over two years, appears to be turning the corner. After delivering a pitiful earnings report, the stock appears to be attracting buyers on any incremental dip. In my view, prospective buyers have two choice here. They can buy the stock on a pullback toward $182.50-185 on broad market weakness. Or they can wait for the stock to trade through and consolidate above $200 and buy the subsequent upside break.

Microsoft (MSFT), having reported a good quarter, appears destined for multi-year highs. In fact, once MSFT recaptures $42, I believe the stock has room to run toward $47.25. Beyond that and Mr. Softy has an open gap (between $48.25 and $53) dating back to March 31-April 1 2000.

Additional Notes:

  1. Cliffs Natural Resources (CLF) closed beneath its March 10 intraday low. Should it remain beneath that price point on a weekly basis, I will likely remove this name from my watch list.
  2. If you look at the next three years of earning-per-share estimates for Walter Energy (WLT), you'll either cry or cringe. The only thing this company seems to be good at is losing money. But Monday's trading formed a hammer candlestick pattern. Such patterns are indicative of a stock trying to establish a bottom. To be clear, I do not yet trust this stock and have no immediate plans of establishing a trading position. But given our recent focus on late cycle sectors, I wanted to bring this potential bottoming pattern to light.

Any trading or volume-profile-related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my Twitter feed @ByrneRWS.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, the author was long MSFT.

TAGS: Investing | U.S. Equity | Stocks

More from Investing

These 2 Crown Jewels of the Electric Vehicle Industry Remain Private

Timothy Collins
Jan 20, 2021 12:10 PM EST

They are Rivian and Lucid, with Chanje close behind.

It's Not All Fun and GameStop

Bruce Kamich
Jan 20, 2021 11:45 AM EST

The charts of GME still look risky to me, and here's the price I'm watching.

Nasdaq Reclaims Its Uptrend

Guy Ortmann
Jan 20, 2021 11:00 AM EST

Market psychology and valuation continue to show warning signs.

3M and Mastercard Continue to Trade Sideways

Bruce Kamich
Jan 20, 2021 10:55 AM EST

Both stocks may eventually do better when investors sense that the economy is indeed going to do better.

The Market Trend Is Still Our Friend

James "Rev Shark" DePorre
Jan 20, 2021 10:36 AM EST

The folks that are waiting for the market collapse are going to have to keep waiting.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST CHRIS VERSACE

    Best Stocks to Buy for the Biden Presidency

    President-elect Biden's massive stimulus plan, int...
  • 08:07 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 1/20/2021

    SPX (Long-Term View) The 1/8/21 high @ 3826.69 i...
  • 11:09 AM EST GARY BERMAN

    Is Copper About to Turn to Rust?

    Below is a very long-term copper chart.  As you...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login