Market Weakness Today Makes for Downside Wins
Welcome back to the Rude Awakening for Tuesday, April 6, 2021.
This morning, we are seeing some weakness across the major indices following the massive run-up starting at the end of last week.
The driver for these new highs has been a combination of positive reinforcement through strong job numbers and Biden’s infrastructure plan, which has given us three straight sessions of explosive moves to the upside.
The fact that we’re giving some of these gains back today makes sense.
The Nasdaq is once again showing more weakness than the S&P 500.
Yahoo Finance reports:
Stocks traded lower Tuesday morning as traders took a pause after a record-setting session on Wall Street, which sent the S&P 500 sailing further above the 4,000 level.
The S&P 500 and Dow steadied just below record levels Tuesday morning. Both reached record intraday and closing highs on Monday, and all three major indexes including the Nasdaq jumped more than 1%.
Traders took the start of this week as their first opportunity to react to the Labor Department’s blowout March jobs report from Friday, which was reported during a market holiday. Other recent economic data was similarly strong: An index tracking U.S. service sector activity surged to an all-time high in March, the Institute for Supply Management said Monday. Traders at least temporarily set aside concerns over fast-rising inflation and interest rates, and the yield on the 10-year Treasury note dipped below 1.7%.
It will be interesting to keep a close watch on the tech stocks, as their sheer size leads the marketplace. If we can get a retracement, that could prompt some great trading opportunities to the downside…
Today, I want to show you one that’s been on my radar…
Bearish Opportunity on Negative News for NIKE
NIKE Inc (NYSE: NKE) has been on my radar for the past two weeks.
Currently, the stock is priced to perfection, which means it’s due for some downside movement.
Its valuations are currently sky high. It’s obviously had a strong run since the start of the pandemic last year. As you can see in the chart below, it went from the low $60 to more than double, as high as $147.95.
And if you look at that chart, we’ve got almost a quadruple top at around the $146 level. There is a lot of resistance at that price point.
We’ve also had some darn good support at the $131 level, but it’s starting to break down once again.
There has been some negative news coming out regarding workplace conditions and human rights issues that NIKE continues to battle in China.
Because of these factors, we have a bearish play for you to check out today…
Have a great trading day, folks.
See you tomorrow.
Editor, Rude Awakening