Indices got rejected at resistance areas, inflation remains hot and the earnings season is just starting

Good morning,

The US inflation data was somewhat in line with the analysts’ expectations. Despite a slightly higher number than expected, we had an impressive rally in the indices both pre-market and after the opening bell. Yesterday, in the Daily Video on Twitter we talked about the resistance levels for the $SPY and $QQQ. Both ETF reached these levels and subsequently retreated.

This was already the 3rd day up for this bounce-rally and the reaction into the close is not alarming. Stocks posted similar candles, as they failed to push through certain resistance levels. At the same time they did not fall apart either and managed to defend key support areas. One stock in particular that showed relative strength early on was $TSLA. The EV maker continues to act special as it once again pushed above all exponential moving averages. We continue to hold several calls for this week should this rally continue.

Today’s PPI and weekly jobless claims will add to the recent data. Depending on the overall picture, one has to be ready to get out of the way quickly should this recent bounce be short lived. In other words, if the past 3 sessions have been just an oversold bounce, there is no need to try and buy a dip once key support areas break. On the other side of the coin, a few sessions within this range would be constructive ahead of the earnings season.

Our focus today will be on $AAPL and $TSLA which are showing good relative strength. Should the market be any good going into the last 2 sessions, it will be vital for these two stocks to hold above their respective support areas. Also, we will keep an eye on the semis, as $TSM reports today before the opening bell. $AMD and $NVDA should have a bigger swing in either direction based on this report.

$AAPL chart

$AAPL continues to act well and is easier to hold in a portfolio approach than most stocks for now. Yesterday it tried to push above $177 but once the indices retreated it could not hold the upper level. Despite a little pullback, it managed to close above the 8&21EMA which means that momentum is still strong for this stock. For today, with futures flattish, see if $174 holds. A move above $177 would mean that yesterday’s candle was just a consolidation.

$TSLA chart

Impressive action for the EV leader. Despite having an exorbitant P/E, $TSLA continues to lead most rallies in tech and has become more stable recently. With the indices drifting lower, $TSLA managed to push above $1100 and looks set to take out $1119 for a move to $1200+ by earnings, should the market conditions remain similar. If the market does falter, watch this stock for overall sentiment and more importantly for investors’ risk appetite. A hard break below $1080 might lead more sectors down with it.

We are in no rush to add to our existing positions. Look at $TSM’s earnings results before the opening bell and see how semis react. The PPI and jobless claims should move the markets a bit pre-market, but wait for the correct set-up. Earnings season is around the corner, make sure to keep your mind clear and your powder dry.

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