Markets Stabilize but Sell Off Still Looms

Equity markets started the day in the red, but quickly recovered by the New York close. The S&P500 index was down to as low as 2,070 which promptly caused the market to rally 10 points and close positive for the day at 2,080.

Oil was down over 2% as measured by WTI futures, but holding above the important $43 level.

The US dollar is taking a break from a month long rally, and could also be headed for a sell-off.

Apple

Credit Suisse released a report today citing that Apple has cut their component orders by as much as 10%, indicating slower sales growth for the iphone 6. This news cause the stock to slump, but pair much of the losses to close the day.

The technicals remain strong on Apple, and we look for a resumed uptrend once the retracement cycle is complete.  If prices hold above $115 and the momentum swings bullish, we see a positive move up to $124, or higher.  We will look to take advantage using long call options when the iron is hot and ready for the strike.

Valeant

When it comes time to sports, everyone loves an underdog story, the art of the bounce-back against all odds.  In the markets, this story never ends well.  There is a theory out there that when stocks drop sharply, one should buy them because they are “under valued”.  This is a flaw, as true value is defined as what someone is willing to pay.  The market is always right.  There are a lot more companies that have gone bankrupt in history than are alive currently.  So what happens if you bought those companies drops?  You would be bankrupt.  Think of Enron, Nortel, Worldcom and more.  Now, looking back at Valeant, this may not be the case, but we do not like playing with fire because we hate being burned.

News emerged last month from short-seller firm Citron Research that Philidor is a phantom pharmacy that exists solely to boost revenue.  These allegations were enough to spook investors and caused a massive drop in the stock.  We do not know if the news is factual or not, but we do know this, if you see one cockroach there are a lot more roaming around as well. We acknowledge the steep drop, but maintain that it is worth whatever the market says it is.

Oil Prices

Oil has now dropped for 5 consecutive days, but has run into a very strong support level which can be the catalyst for a move higher.  We like that momentum is starting to neutralize, and even cross into bullish territory.  While not yet ready for a trade, oil is on our watch list and we stand ready to take action as soon as we see some more confirmation signals.

Stay tuned for more updates and trade setups.  Good luck and good trading.

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The information contained in this presentation is solely for educational purposes, and does not constitute investment advice.  The risk of trading in securities markets can be substantial.  You should carefully consider  if engaging in such activity is suitable to your own financial situation.  TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.