Forget FANG, This Stock Is The New Market Leader $MSFT
Almost everyday we hear traders and investors talking about the FANG stocks as the market leaders. While Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOGL) are extremely important tech bellwethers, they are not leading like they have in the past. The new leader of the stock market is Microsoft Corp (MSFT). Microsoft's market cap is now above $1 trillion and the stock is making new all time highs. The trend is up for the stock, MSFT is also trading above every major moving average on just about every important time-frame. Microsoft is taking market share from these tech giants and others in a very quiet way. This is by far the most important stock to follow for leadership in the stock market right now.
Watch this Technical Trade Level For Zoom Video $ZM
Zoom Video Communications Inc (NASDAQ:ZM) was one of the hottest initial public offerings (IPO) of 2019. The company came public on April 18, 2019 at $65.00 a share and was an instant success. ZM stock traded as high as $107.34 a share on June 20, 2019 before seeing some sharp selling over the past four trading sessions. Traders should note that the stock has a big gap fill on the chart at $79.43 level. Very often gap fills will serve as very good support when tested. This gap fill is actually stronger than most because it comes from a failed bearish pattern which will often signal very strong institutional sponsorship at that level. So traders should keep an eye on ZM stock around that $79.50 area.
Oil surged higher in trading today after inventories showed a surprise drop. Continued tensions with Iran have added to geopolitical risk as well, pushing the price of the commodity higher. While the news seems bullish, near-term tops are made in this manner. Oil tagged four factors of resistance today. First, oil hit the daily 50 moving average on the $USO. Second, the USO tagged the daily 200 moving average. Third, oil tagged a major gap window on the USO chart and fourth, oil has a daily time count. This gets the top pro traders to inch into shorts here at the $60/bbl level or $12.43 on the USO. They are looking for a swing trade short (quick drop in price).
China Stimulus & Technical Analysis Says To Buy Nio Inc $NIO
Most of the investing public is running scared from shares of China electric car maker Nio Inc (NIO). However, after falling from a 52 week high of $13.80 to its current $2.58, investors may want to take a second speculative look. China stimulus is getting into the system and more is coming. In fact, China will be forced to compete with lower interest rates and additional stimulus from the European Central Bank, Federal Reserve and Bank of Japan. The government looks at electric cars as essential for the future power of China by eliminating smog in the major cities. Car makes like NIO will see additional help and support from the Chinese government. While deliveries have fallen lately, that is likely within a month or two of changing as the stimulus kicks in.
The trade deal, while it may go on for a little longer, will end. The end date will likely be prior to the 2020 elections. At 52 week lows, any hint of a cease fire or agreement between the United States and China will send shorts running. President Trump needs a win going into the election and a deal with China that stimulates the economy might be the one thing that could help him win (and he knows it).
On a technical basis, NIO Inc has already made a pivot low on June 14th at $2.35. After that low, the stock ran over $3.00 and is currently in a classic bull retrace. In addition, technical metrics like the RSI and MACD are showing positive divergences, signaling further upside is likely. The stock is still oversold on a monthly and weekly basis signaling there is still upside to go. I have a technical target in the next couple months of $4.35. That is a potential upside move of 70%. Hedge funds continue to hold large positions with a long term view. In the last two weeks, sellers have started to fade with volume becoming lighter while large block buyers have increased.
Please note, this is a speculative call on a small/mid cap stock. Any position should be small and part of a diversified portfolio.
Disclosure: Chief Market Strategist Gareth Soloway holds a long position in NIO Inc (NIO)
Who would not want to be a day trader? You wake up in the morning and go straight to your computer and start to look for stocks and equities that could make you money in minutes to hours. A day trader can basically work from anywhere with a decent internet connection. There is no dress code, so many day traders are actually trading in their pajamas every morning. You can also work as little or as much as you want, so you set your own schedule. It sounds like the worlds greatest profession, but without proper knowledge the average person who attempts the day trading world will not last a year in the business.
Day traders try to make money using two simple techniques. The first technique is called scalping, this is when a trader can isolate a stock declining or rising sharply into a major support or resistance zone. The trader will generally try to capture a small gain in the equity they are trading. The scalp play will usually last a few seconds to an hour depending on the particular equity, but the trade is expected to be done quickly and it usually involves a smaller time-frame chart. Then there is the day trade. This is where a trader will look at multiple time-frames and try to isolate a pattern that consistently plays out on the charts over and over. This trade usually last several minutes to several hours. Due to the fast trading action day trading can become very stressful and will require a lot of concentration. Most day traders will find a couple of chart set-ups that they favor and continually look for those patterns and setups to appear before executing a trade.
Today, I'm going to share one simple tip that can help save scalpers and day traders from daily heartache. I simply call this the light volume rule. Often, I find many day traders trying to sell short equities at a resistance level on the chart. While this is fine and usually a good way to make money it is very difficult to do under certain conditions. You see, as a day trader we must examine and take the pulse of the market everyday. We do this be looking at the volume in the SPDR S&P 500 ETF Trust (NYSEArca:SPY). You see, when the SPY volume is light it will generally favor market upside in the S&P 500, NASDAQ Composite and the Dow Jones Industrial Average stocks after 11:00 ET. I cannot tell you how many times a trader will try and short an equity around the lunch hour when volume starts to drop off. So here is rule number 1, if the SPY is trading less than 35 million shares by 12:00 pm ET please be careful trying to day trade equities on the short side, especially the SPY or S&P 500 e-minis contracts (ES-U19). There is simply a lack of institutional selling pressure when the volume is light. It should also be noted that the financial institutions move markets. It is not the person at home with an E-trade account watching fast money that moves the markets, it is the large financial institutions that carry the real power.
Traders and investors can easily look at this chart and notice that the market volume is extremely light. Please note, the low of the day was made at 11:00 am ET. Since that 11:00 am low the markets have slowly rallied higher, making any short trade very difficult. Hopefully, if you are new to day trading you will adopt this policy of monitoring the volume in the SPY every trading session. It has helped save many day traders from making a bad trade during the light volume part of the session. Hopefully noticing this important intra-day volume trend that has been working for years can also help you make a lot of money on your long side day trades.
Here's Another Market Conundrum, Cut Rates Or Don't Cut Rates?
This morning, the highly anticipated June non-farm payroll was released at 8:30 am ET. The report was much better than expected with 224,000 new non-farm jobs announced. The expectation was for 160,000 new jobs, so this was a hot number. Private payrolls also were better than expected with 191,000 new jobs, expectations were for just 160,000.
The S&P 500 Index has been soaring since June 3, 2019 when it traded as low as 2728.81. At that low, the Federal Reserve said it would do what was necessary to keep the expansion going. This comment fueled the S&P 500 Index to new all time highs. Recently, the markets have been surging higher on the back of weak economic data and the anticipation of a rate cut by the Federal Reserve later this month. Today's strong job number now puts the Federal Reserve in a tough position to raise rates. Bond yields on the 10-year U.S. Treasury Note are surging higher today by 11 basis points to 2.065%. Earlier this week, yields on the 10-year have been below the psychological 2.0% level.
In this bizarre stock market it seems that bad news is good news and good news is bad news. The European Central Bank (ECB) and the Bank of Japan (BOJ) both have negative rates already and this is a problem for their markets and economies. German economic data was very weak today as manufacturing orders dropped 2.2% month on month in May and down 8.6% from the same month in 2018. This is probably why the U.S. Dollar Index (DX) has been very strong over the past year or so. Weak European economic data will keep money coming into the U.S. Dollar.
The yield curve has now been inverted for about a month now. If yields on the 10-year U.S. Treasury Note rise then the markets will be less likely to price in a 50 basis point rate cut in late July when the FOMC meets again. Many traders and investors are banking on this cut by the central bank, hence the recent stock market rally on weak and bad news. Perhaps, the Federal Reserve will cut rates by just 25 basis points in late July. Will the markets be disappointed by this as it has already been expecting a 50 basis point cut? If rates rise significantly from here then it could signal that there might not be a rate cut at all in late July. That may not be good for stocks since they seem to be hoping and expecting more easy money policies by the central bank. Here we are again, the markets face another conundrum.
Not All Health Care Stocks Are Created Equal, So Play It This Way $XLV
This morning, the leading health care stocks are trading lower to start the session. Politicians on both sides of the isle have been very critical of drug prices and health care costs. You can easily see and expect more political criticism of the health care companies as the Democratic party tries to find a 2020 nominee. President Trump has also vowed to lower drug costs, so where do you invest in this diverse industry group?
Despite today's declines in most of the major health care stocks the over chart pattern of the Health Care Select Sector SPDR Fund (NYSEArca:XLV) is still looking good on the charts. This leading health care ETF holds companies such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc (NYSEFE), UnitedHealth Group Incorporated (NYSE:UNH), Merck & Co. Inc (NYSE:MRK), Abbott Laboratories (NYSE:ABT), Medtronic Plc (NYSE:MDT), Thermo Fisher Scientific Inc (NYSE:TMO), Amgen Inc (NASDAQ:AMGN), AbbVie Inc (NYSE:ABBV) and Eli Lilly and Company (NYSE:LLY). This ETF is fairly diverse and is still showing a decent chart pattern on the bigger time-frames. At this time, the XLV is trading above its 50 and 200- day moving averages. As long as the XLV remains above these key levels this ETF continues to be in good shape. Should a major decline occur in the XLV then there should be major chart support around the $86.00 area. This is where the ETF was defended in mid-April 2019 and would likely be support again if retested.
The bottom line is that health care stocks have become very difficult to trade and invest in on an individual basis lately. The best way to play the broad based industry group is likely through an ETF like the XLV. This ETF gives you diversity to the sector and holds some of the best companies in the world. Should the equity trade sideways or even lower it pays a 1.6% dividend while you wait for some appreciation to occur.
Vmware Inc $VMW Keeps Dropping, Watch This Trade Level
VMware Inc (NYSE:VMW) is a leading cloud software stock that has been declining since mid-May 2019. The stock topped out on May 16, 2019 at $206.79 a share. Since that high pivot, the shares have declined lower by 21.0% and are now trading at $162.98 a share. Traders and investors should now watch the $150.00 area as major chart support. This level was where the stock broke out of a one month base in early February 2019. Often, when a stock declines into a past breakout level it will usually be defended by the institutional money when it initially hits the support area. I will now be watching VMW for a potential long side trade when the stock trades down into this level.
Even with the "Powell put" in play the yield on the 10-year U.S. Treasury note is just down 0.01 to 2.044%. One would think it would be falling more, but this is a market of dislocations. Thank God for the charts allowing us to see through the noise and make money! -Nick Santiago
In 2019, all of the leading managed health care stocks have been very volatile. Political pressure from both sides of the aisle have been the catalyst for the excessive whipsaw in this industry group. Stocks such as Humana Inc (NYSE:HUM), Cigna Corp (NYSE:CI), UnitedHealth Group Inc (NYSE:UNH) and others have been very susceptible to political news on a daily basis. Last week, the sector rallied sharply higher after the White House abandoned its plan to eliminate rebates from government drug plans. Unfortunately, these stocks are pulling back today after Presidential candidate Joe Biden proposes a public option for health insurance for anyone who wants it and will give power to Medicare to negotiate drug prices.
Last week, the managed health care stocks all broke out on a technical basis. Humana Inc (NYSE:HUM) is one stock that should have more upside despite today's pullback. Today, HUM stock is falling by $4.48 to $286.77 a share. Traders and investors should now watch and see if this stock can consolidate on the charts as last week's break-out pattern suggests a move back up to the $310.00 level. This major resistance level is where the stock sold off in late February 2019. I will be be keeping this leading heath care stock on my radar for a bullish pattern development.
Goldman Sachs $GS Pops After Earnings, Here's Where It Hits A Wall
This morning, leading financial stock, Goldman Sachs Group Inc (NYSE:GS), is trading higher after reporting earnings. The financial giant is trading higher by $2.77 to $214.35 a share as investors celebrate the company's results. Many traders and investors are wondering how high could GS stock go before it stalls out. After all, the stock has been rising since June 3rd when it traded as low as $180.73 a share. Traders and investors can easily see that the stock will face major resistance around the $220.00 area. This key resistance level is where the stock broke down on volume back in early November 2018. Often, when a stock retraces back up to its former break down level it will be met with major selling pressure. Remember, there are traders and investors that have been holding the equity from that time and will usually look to get out of the stock when given the chance to get back to break-even.
Today, most of the leading railroad stocks are declining sharply lower after a very weak earnings report from CSX Corp (NYSE:CSX). The company said it expects revenue to fall by as much as 2.0% in 2019. Prior to this report, the company was forecasting an increase of 1.0 to 2.0%. Currently, CSX stock is declining lower by $8.52 (-10.50) to $71.05 a share. CSX stock is now trading below its 200-day moving average, this puts the stock in a weak technical position. Traders and investors must now watch for further downside in the coming days and weeks ahead. The next major support level for CSX stock will be around the $65.00 area. This level is where the 100-week moving average is currently and should be defended when tested. Other railroad stocks that are falling in sympathy to CSX Corp include Norfolk Southern Corp (NYSE:NSC), Union Pacific Corp (NYSE:UNP) and Kansas City Southern (NYSE:KSU).
Shares of KLA Corp (KLAC) have surged since June from a pivot low of $101 to its current $125.50. Technical signals are now entering extreme overbought but pro traders think there is one more push higher. The technical short signal is at $128.50. At this level ($3 away) KLA Corp will tag a major gap fill and double top. This will trigger the highest reward/lowest risk short trade for investors. Note the chart below.