The action started off poorly this morning as market players are impatiently waiting for some China trade news. Traders ignored the latest impeachment news but news that the Democrats have agreed to a USMCA trade deal provided a convenient positive catalyst. The China tariff news will overshadow everything else but incremental positives like USMCA or a friendly Fed help to keep technical patterns healthy.
Although the indices are close to flat and breadth is just slightly positive, there continues to be some pockets of market strength. Traders want to knock out some trades while they wait and they are creating some positive action as they push. This sort of environment leads to self-fulfilling charts that attract additional trading attention and keep them running.
I continue to trade some of my favorites like Aurinia Pharmaceuticals (AUPH) that priced a secondary this morning at $15. Management handles this quite well and the stock hasn't even come close to the offering price.
Another name I added this morning is Personalis (PSNL) . This is an absolutely terrible chart which is what makes it interesting. The likelihood is that many of the IPO buyers will be looking to sell in order to lock in a loss to offset some big gains elsewhere. Once that pressure is removed the stock should bounce in January. PSNL also has some shares locked up that will be eligible to start trading on December 20. I suspect that the stock is already washed out to some degree and that is why it has started to bounce in the past week.
This rebound after tax-loss selling is known as the January effect and it should be particularly robust this year due to the huge gains in the indices. I'll be discussing some other names that should benefit from the January effect. Twitter (TWTR) is one that is on my radar. If you have any ideas tweet to me on Twitter at @RevShark.
Although the market is being held hostage by potential headlines about tariffs, the trading action is not bad if you are selective and have short time frames.