• 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
    • Bruce Kamich
    • Doug Kass
    • 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

Let's Shine a Light on Lucid Motors as It Slides Downhill

Brad Ginesin
Jul 2, 2022 1:00 PM EDT

LCID's market cap has been deflated, so is it now a bargain, or can it slip further?

Stop Wishing, Hoping and Praying and Take Control of Your Investing

James "Rev Shark" DePorre
Jul 2, 2022 10:00 AM EDT

The most powerful thing an investor can do is embrace the idea that they don't know what the future holds.

If You've Got Time, These Three Dividend Aristocrats Should Pay Off

Bob Ciura
Jul 2, 2022 7:30 AM EDT

There high-growth dividend stocks will be here over the long haul.

Welcome to Second Semester on Wall Street, Here's How to Make the Grade

Jim Collins
Jul 1, 2022 4:36 PM EDT

Think you can own big tech? You might just get an 'F' for that. Here's what will get you on the other side of this year.

We Got a Break, but the Heat Is Still On

James "Rev Shark" DePorre
Jul 1, 2022 4:22 PM EDT

A limited rally cooled some of the negativity on the market, but guess what's going to hit the fan soon?

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

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • 04:41 PM EDT PAUL PRICE

    First-Half Results - Putrid; Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 mark...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 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