I am so confused. For the most part, we had stellar earnings and the market barely budged. It is as though nothing is good enough on the earnings front (with a few exceptions on Friday). Instead of buying into the good news, traders and investors are using the announcements to sell. Of course we are only one week into earnings season and there could be some positive responses to the earnings results this week. Perhaps the whole world is waiting for Apple's (AAPL) earnings on Tuesday and many investors appear to be taking a cautious stance ahead of that report.
Speaking of AAPL, this week many investors jumped off the "apple cart" or should I say bandwagon. No matter how bullish you are on this issue, the chart looks terrible. And when the 570 level gives way, get your bids out at the 550 level in a hurry, because it is going to be there in a heartbeat. For those investors who were not savvy enough to exit on the way up, good luck trying to sell on the way down. There is absolutely no liquidity in this issue and the High Frequency Traders can sense any sizeable seller from a mile away. From the institutional traders I talk to, you have to knock AAPL down five points to get 10,000 shares off and then pray to get another piece off on any rebound in the price. Considering the recent volatility in this issue, it would not be surprising if AAPL had another 50 point move off of their earnings results on Tuesday. For investors regretting not exiting AAPL above 600 prior to the earnings announcement, lower your target price to 590.00 and pray for a pre-earnings bounce.
Exxon-Mobil (XOM) was immune to the selling pressure this week. Perhaps it was bolstered by decent earnings from other stocks in its sector. Keep in mind, XOM was not one of the issues in the Big 10 that was able to make a new 52 week high during the recent rally, so it may not be as vulnerable if the overall market goes into reverse. From a technical perspective, XOM is very straightforward, look at the last three nearly identical trading ranges from last week and go with the breakout above 86 or the breakdown below 85.
International Business Machines (IBM) price action was the most puzzling of all issues that released earnings this week. IBM beat the street, raised guidance and the dividend, and then got pounded, trading down over seven points on Tuesday night after the announcement. IBM needs to put a string of closes together above the 200 level in order to reverse the sell-off from the all time high of 210.69.
Hooray for Microsoft (MSFT), following the script to perfection. Good numbers, gap and go on the open and a test of major resistance at the 33.00 level. It simply ran out of gas on Friday to take out the huge size surrounding the 33.00 level, but could easily make another attempt this week. But for now, 33.00 remains major resistance until proven otherwise. After that, there is no major resistance in MSFT until the 34.50 level (which would be a 50% retracement from the 2008 low of 14.87, and the all time high of 53.97). But there is no hurry to purchase the 35 calls, since MSFT is more likely to drift back down and fill the gap from Thursday before it resumes its rally.
Similar to MSFT, General Electric (GE) posted good numbers, but no one really seemed to care. After an initial rally, which failed to even sniff the 20 level, GE pulled back and settled in the lower portion of its trading range. As long as 19.25 holds up in GE, this issue has a chance to test 20 again and make another attempt at the 52 week high of 21.00. If a boost from GE's financial unit was not enough of a catalyst to ignite a rally, I'm not sure if anything really can.
Chevron Corporation (CVX) is in a major consolidation phase and is gearing up for its next big move. In fact, CVX has traded between 100.52-104.09 since April 9th, which is very unusual for this high flyer. Perhaps CVX's earnings will be the impetus for a break out above 104.09 and a rally back to 108, or a break down below 100.51 and an attempt to fill the gap from late November at 98.05.
AT&T (T) rode the coattails of decent Verizon (VZ) numbers on Friday and traded above 31.00 for the first time since going ex-dividend at the beginning of the month. However, it was unable to sustain that level and closed at 30.86. Expect major resistance all the way from 31.16-31.38 as the dividend players that are still holding on, will be aiming for a scratch on their stock positions. Expect major support at the 30.50 level, and for T to be range bound unless it comes up with a surprise on the earnings front.
Once again, Procter&Gamble (PG) is flirting with its 52 week high and there are huge institutional sellers at 68.00, that have kept a lid on PG's ascent so far. Expect the HFT crowd to be doing what they do best, selling in the high 67.80's, up to 67.99 until the seller at 68.00 is taken out. Do not expect a breakdown of this issue until 65.80 is taken out on a closing basis, the lowest it has traded since February 23 (post announcement of its drastic cost-cutting measures).
Johnson&Johnson (JNJ) is down but not out. After being stuck in its year long trading range of 64.00-66.32, it finally broke down, trading down to 62.76 this week. But a rally ensued, and JNJ is banging on the door of 64.00 once again. However, multiple highs from 63.92-64.28 from the last several trading sessions reinforces the mundane but true technical analysis premise that "old support makes new resistance". A string of closes above the 64 level is needed to prevent a retest of this week's low.
The Great Wall of China in Wells Fargo (WFC) has repositioned itself to just under 34.00 from 34.50, with four of its last six highs being between 33.74-33.87. And with Friday's close of 33.00, its lowest close of the week, expect the major offers to come down even further this week. On the downside, 32.67 (post earnings low) is the only major support preventing WFC from trading back down to the 31.00 level.
The muted response to this week's mostly positive earnings announcements can be interpreted in two ways. All the "big money" supposedly on the sidelines is lying low and allowing profit takers and short sellers to do their thing, before they move into the action. Or many of the numbers were already anticipated by the street and already baked into the current stock prices and the prospects for the next quarter are not so rosy. Stay tuned, a rally above 1390.00 in the S&P futures or a break below 1360.00 will provide a better clue as to the price action in equities for the next three months.
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