I remember the day I officially grew up. It was a horrible day. I’d been studying for the SAT and playing some Nintendo (not necessarily in that order). The day was pierced with the news that my beloved grandmother had been diagnosed with terminal cancer. In one of her final lessons to me, she implored me to continue educating myself as much as possible from everything from fun things like fantasy baseball (she loved baseball) to very serious things. She also implored in my head the concept of “while you do need to educate yourself as much as possible, don’t be afraid to act if need be even if the education isn’t quite complete.” That seems a little off to most people, but it’s just right to me because there are times that if you try to learn every fact at hand, you miss doing what you need to do in a timely fashion. Just watching her and the fate that befell her immediately got a young me freaked out about cancer and the possibility of getting it- even if the likelihood of procuring cancer at the ripe age of 17 was not very high. Much more mundanely, this is what happened to many high-flying stocks yesterday. On Tuesday night, one of the leading cloud computing entities (Equinox Systems) indicated their business was slowing. The stock was pummeled for a loss of over 30% yesterday. The stocks in the sector such as RAX followed suit in falling a good bit as well. That makes sense. What was interesting though was that the forth began coming out of some of the other momentum plays yesterday because of the fear of what could happen to them. By that, I mean players worried that the same fate of EQIX could befell other stocks. This is why their were huge down moves in the likes of FFIV, NFLX, AMZN, BIDU, CTXS, RVBD, MTB, WYNN, and CRM. Does renting videos really have anything to do with EQIX’s downfall? Not really. But the mere thought that there could be a major decline in a NFLX if they indicated their growth was slowing was enough to stoke fear in the hearts of the momentum players. As the month of October rolls on, look for this tug-of-war of increasing fear and greed to get much more fierce- which will likely make our trading opportunities that many more in not only quantity but quality as well.
Markets in Asia were flat overnight and slightly higher in Europe as every major bourse either closed at or traded/s within a fraction of unchanged. The other markets continued to extend their amazing movement with the 10-year now under 2.40%, gold up almost another 1%, oil up almost another 1%, and the dollar is breaking down to 15-year lows against the yen (and challenging 1.40 euros). Futures are slightly higher after decent claims data and building upon continued movements in the external markets. Look for the strength to hold overall with a focus on small cap biotechs, the retailers with all the same-store sales data, and the momentum stocks that were moving around yesterday.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
AXU- closed near a high after a positive update from the Keno Hill drilling program
ITMN- sold Danoprevir rights to Roche for $175 million
FSLR- announced 380 Megawatt increase in 2011 orders
GROW- closed near a high
WFR, FDO- mentioned on “Mad Money” last night
ALVR- signed deal with Barrett Xplore to deploy the first national 4G network in China
ANF- good same store sales results
JWN- good same store sales results
SPEX- announced statistically significant results in phase III study with D-tagatose in Type 2 Diabetes
Bad-The following stocks have bad news and/or a weak technical pattern
BLUD- lowered earnings guidance
NSR- named new CEO and sees 3rd quarter revenues below estimates
FFIV- closed near a low
NFLX- closed near a low
AMZN- closed near a low
BIDU- closed near a low
EQIX- closed near a low
DNDN- closed near a low
RVBD- closed near a low
AKAM- closed near a low
APKT- closed near a low
RHT- closed near a low
TDC- closed near a low
WYNN- closed near a low
ISLN- closed near a low
WL- closed near a low amid rumors a capital infusion is needed for the company
MAR- poor earnings
AUMN- seeking equity financing
VNR- unit offering
TGT- poor same store sales results
PEP- poor earnings
Earnings:
THURS OCT 7 BEFORE
PEP
THURS OCT 7 AFTER
AA MU
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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