EB Daily Market Report - Wednesday, April 7, 2021
Executive Market Summary
- Futures were slightly lower across the board and we did open lower
- The NASDAQ, however, has outperformed since the opening bell, this time with technology (XLK, +0.62%) a big reason why
- There was little in the way of economic news and the 10-year treasury yield ($TNX) is relatively flat today
- Communication services (XLC, +0.81%) is today's top performing sector as internet stocks ($DJUSNS, +1.23%) lead
- Amazon.com (AMZN, +2.38%) is lifting the broadline retail space ($DJUSRB, +1.88%)
- The U.S. Dollar (UUP, +0.12%) has been weak of late, but is trying to bounce off a 20-day EMA test today
- That dollar rebound could be at least partly responsible for a dreadful performance by materials (XLB, -1.70%)
Market Outlook
Apple (AAPL), Alphabet (GOOGL), and Facebook (FB) all have one short-term problem in common. They have negative divergences on their 60-minute charts. Therefore, short-term traders beware:
AAPL:
Also, this slowing momentum is coinciding with AAPL testing a key overhead price resistance level.
GOOGL:
I would expect to see a pullback fairly soon to retest the area of the recent breakout.
FB:
FB has been very strong since the beginning of March, but this would be a good time for a pause.
Sector/Industry Focus
Speaking of negative divergences, technology (XLK) has one of its own on its hourly chart - and it's developed while price action tests major overhead resistance near 139:
A breakout above 139 would be to an all-time high, so that should be respected. Price action trumps divergences. But failure here at this key price level could lead to short-term weakness back to retest the recent inverse head & shoulders breakout above the 135 neckline. I would only be concerned about this as a short-term trader. Longer-term, I remain extremely bullish, so I'd simply hold and ride this secular bull market advance higher.
ChartLists/Strategies
I used the RSI 40-50 scan on our website against our Strong Earnings ChartList (SECL) to identify the strong earners that have pulled back recently. To try to find the "best of the best", I also added a "SCTR > 90" filter. So stocks returned should be strong on a relative basis and in that RSI 40-50 zone where we normally see uptrending stocks bottom and begin rallying again.
Here are the 16 stocks that were returned: WAL, JWN, MGNI, DMTK, M, CHX, SLCA, GCI, CMRX, PLT, WBS, BHC, CDXC, VET, SIVB, SNBR
I thought a few looked interesting for different reasons:
DMTK:
The blue-dotted vertical lines highlight the last 5 times that DMTK had an RSI reading of 40. In all but one case, we saw a significant bounce. DMTK has already bounced over the past week or so, but two overhead levels are holding the stock back from further gains - the 20-day EMA resistance and then the resistance provided by the bullish wedge.
PLT:
The critical level here is gap support near 35. PLT has bounced a few times from this support already. A close beneath gap support would be more bearish near-term, but I expect that level to hold as support.
SNBR:
The negative divergence suggested that SNBR was poised for some short-term consolidation/selling. We've seen it with SNBR now trading back at key 50 day SMA support. Also, SNBR's PPO is approaching a centerline reset. While a quick move just beneath the 50 day SMA is certainly possible, I believe we're getting close to another rally in SNBR.
Earnings Reports
Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.
Wednesday, April 7:
RPM, LW, MSM, SMPL, SCHN
Thursday, April 8:
STZ, CAG, LEVI, WDFC
Economic Reports
None
Happy trading!
Tom