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Market Commentary by Naufal Sanaullah
Naufal Sanaullah firstname.lastname@example.org www.shadowcapitalism.com
Strong earnings beats and upward guidance revisions from IBM and Johnson & Johnson helped to set the pace early for risk, and the markets never looked back all day. Better than expected results from Portuguese and Spanish auctions also provided a catalyst for risk-‐on, as the yields on these auctions are starting to slow down after sharply rising auction after auction. After hours, Apple provided more fireworks as iPhone sales helped buoy earnings past consensus estimates, even as iPad sales underwhelmed (unsurprising, given the March 11 US release date and March 25 global release date). The S&P added another 1.35% to its value today, and the inverse head & shoulders I noted in last night’s piece seems to coming to fruition. A break through 1340-‐1350 should send the market on another strong leg up, and after AAPL’s earnings after the bell, the chances of that happening soon are impressive. The Nazzy soared 2.25% today, and tech continues to look great here, particularly large-‐cap from a value standpoint.
EURUSD had a monster day today as Spain & Portugal successfully placed some paper at better than expected yields. With risk on and the ECB-‐Fed policy differential only widening, EURUSD remains a go-‐to long for the time being, and I think 1.50 is in the cards. As I noted last night, the breakout through and retest of 1.42 is significant from a technical standpoint, and we are now trading almost four big figs rich to that level.
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Crude inventories came in well below expected today, as a 2.3m bbl drawdown was announced, against consensus estimates of a 1.3m bbl surplus. This helped to drive oil and other commodities higher still, and crude now sits comfortably back above $110/bbl. Support around $106/bbl is holding well and I expect new highs in oil to be posted sooner than later. Supply concerns are going nowhere, and neither are inflationary pressures in EM, especially as Brazil and China continue to be behind the curve in their attacks on inflation.
With oil prices on the rise and inflationary pressures creeping up, solars presumably would be beneficiaries. In fact, solar stocks have traded rather poorly, underperforming in recent months, although that may be due for a change in the near future. Jinkosolar is one solar name in particular that I think could be ready to set off a rally, especially as it approaches the apex to its symmetrical triangle. A breakout implies a move back to October 2010 highs around $40, about 67% rich from current levels.
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Moving over to tech, open source enterprise solutions provider Red Hat staged an impressive 5.67% rally today and is approaching a big breakout attempt. RHT has gone straight up since posting great earnings late last month, and today broke out of the flag it had been building as it consolidated the earnings surge. Overhead resistance at $48-‐49 will be the next test for this stock and a successful breakout could lead to some dramatic upside. I am long as of today.
Another tech name I went long today was the cloud computing play FFIV. After finding strong support in the low $90 range, FFIV managed to post a strong 7.34% gain today as it broke out of its falling wedge pattern. Earlier today, I noted that “after VMW’s great earnings, FFIV has a lot of room to run,” and after announcing terrific earnings after hours, FFIV rallied another 12.53% after the bell. It is already back above its 55d and 200d now and the case for cloud stocks here continues to get more convincing.
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Fiberoptics stock JDSU has been on my watchlist for a while now, ever since posting a meteoric rise late last fall. The stock has spent the last couple months retracing some of its gains and consolidating a bit, but after its recent successful retest of the $18 S/R level, it looks ready for another move back up. The 21d has been a significant moving average for this stock in recent months, and after spending a month below the 21d, it is now making an attempt at breaking back above it. I would not be surprised to see this stock much higher in the next few weeks and months.
Rounding things out in tonight’s rather short piece is a pharma name I came across today that caught my eye. Vertex Pharmaceuticals is behind a new treatment for Hepatitis C that will be getting its FDA review next month. It is currently trading in a large triangle base that is approaching is apex and showing signs of imminent upside resolution. Smaller biotech firms can be risky plays, but from a technical standpoint, the breakout and retest of $44 is very convincing.
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Be watching the barrage of US data coming out tomorrow, especially as the S&P has found a tighter inverse correlation with initial claims than almost any other data input. Continued strength in the labor market and manufacturing in tomorrow’s data would be very bullish for risk appetite. Tomorrow brings: • • • • • • April German IFO (4:00am: 115.5 consensus | 115.8 prior) March UK retail sales (4:30am: -‐0.4% consensus | -‐0.8% prior – MoM) February Canadian retail sales (8:30am: +0.5% consensus | -‐0.3% prior – MoM) US initial jobless claims (8:30am: +390k consensus | +412k prior) February US housing price index (10:00am: -‐0.3% consensus | -‐0.3% prior – MoM) April US Philadelphia Fed (10:00am: 36.8 consensus | 43.4 prior)
Good luck trading.
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Long/Short L L L L L L L L L L L L L L L L L L L L L L S L L L L L L L L L L L L L L L L L L L L L Ticker /ZC OIH TITN NE /CL UA MEE CRR SOHU SINA BIDU AMRN DECK LULU CMG DNR PCLN WLL MRCY PRGO CHK CTXS SCCO USD/JPY EUR/JPY CAD/JPY SGD/JPY EUR/USD RAX TSLA NFLX SD SHS EQIX VHC MSFT MO NZD/JPY WES SGMO N AMZN POT DHX Entry 550.00 150.00 21.30 37.65 86.30 57.55 55.55 114.33 80.04 87.55 118.30 8.85 79.92 75.15 240.67 21.60 440.72 63.02 18.70 72.76 30.65 69.61 41.25 78.85 116.60 81.30 62.55 1.4230 35.55 26.15 220.40 10.35 44.95 85.70 21.12 26.05 25.90 66.10 34.95 7.59 29.04 178.38 55.38 16.91 Stop 541.90 138.50 20.45 36.50 83.80 51.55 51.00 105.00 73.00 72.60 109.30 6.75 76.90 71.45 232.40 20.10 409.10 60.00 17.75 71.20 28.50 65.05 42.65 77.70 114.90 79.70 60.10 1.4085 33.45 21.70 202.15 9.15 40.45 82.10 18.65 24.60 25.30 64.00 32.90 6.90 26.75 169.90 50.20 14.95 Performance +33.77% +7.05% +46.90% +15.35% +29.78% +36.32% +18.92% +18.14% +18.51% +63.14% +26.71% +80.45% +19.82% +32.70% +19.71% +8.15% +20.56% +13.82% +11.60% +21.22% +5.09% +9.01% +11.39% +310 pips +310 pips +530 pips +390 pips +380 pips +23.54% –1.55% +10.90% +20.48% +27.30% +9.78% +18.42% –1.12% +0.97% –30 pips +2.32% +1.98% +1.27% +3.08% +3.43% +2.31%
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Long/Short L L S L L S L S S S S L L L S L S L
Ticker LLNW EMC GS KOG CRM EJ QLIK DAL UYG FXI SCHN IMAX MRCY GOOG AUD/CAD EUR/CHF USD/CAD TBT
Entry 7.22 26.44 154.05 7.05 131.91 12.00 27.93 9.27 66.63 45.40 58.36 30.10 19.95 521.10 1.0135 1.2820 0.9655 36.35
Stop 6.45 25.25 158.50 5.65 115.60 13.60 25.25 10.30 74.00 47.05 61.05 28.55 17.20 499.90 1.0260 1.2720 0.9715 34.95
Performance –3.32% +5,75% +0.88% +1.13% +7.71% –2.17% +4.98% +2.16% –1.43% –1.30% –3.75% +4.52% +4.61% +0.89% –55 pips +115 pips +185 pips +0.69%
Long/Short Ticker Entry Stop Performance
Long/Short L L L L L L L L Ticker FFIV JKS DNDN JDSU RHT GLNG VRTX BORN Entry 98.83 24.00 41.20 18.96 47.70 30.10 48.05 9.35 Stop 89.85 19.60 39.15 17.55 43.80 25.00 45.65 8.45 Performance
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