initial weakness, will it be bought again?

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$SPY so the bulls picked up right where they left off from last week and grinded to new all time highs as the market digested a busy earnings week. That was until we came in Friday morning to a gap lower and continued weakness throughout the rest of the day. Friday’s weakness took out the lows of the previous 3 days and now we have an open bearish gap to the downside with the market finding support right where we could have expected it to at 197.50. The action early next week will be very interesting to see if the bears can add any follow through to this initial weakness and break an important support level in the process. We know from looking back over this entire year that buying into support has been one of the most profitable trades to take time and time again. So, will this time prove any different? Only time will tell, and I’m sure as hell not going to speculate, that’s what flipping a coin is for. What I will say, is that if 197.50 breaks next week, and we head back down to the larger 196 support then that will be the third time the bulls will be asked to pony up some cash and buy that level in just the past few weeks. History suggests the more times you retest a level the less likely it is to hold the next time around. Again, no predictions, just be aware. Short term time-frames are flipping bearish, intermediate and long term uptrend still in tact. SPY15

 

$AAPL it’s tough for the market to break down when you have setups that look like this. A very clean breakout to recent highs in Apple post their earnings report followed by some textbook digestion for the remainder of the week. I like this pattern a lot for continued upside above $97.85 next week, especially if the $SPY can cooperate in the process. Uptrends on all time frames and just a stones throw away from all time highs. I like it.AAPL15

 

$FB speaking of text book flags. Facebook is another name that exploded higher after reporting earnings this week. We took out the previous all time highs and began the digestion process for the remainder of the week. With such a large, obvious, open gap it will worth watching closely how the market reacts to the 4 point gap and to the initial $75 support the stock has carved out this week. This is likely a situation where the stock needs more than two days to digest a move of this size, but it’s possible that buyers are still pent up here and the momentum could continue. Above 75.50 and using a stop at the entry of the gap sets up a low risk entry for further upside if you believe in Facebook here.FB15

 

$AMZN so one could certainly contribute Friday’s $SPY weakness to Amazon which disappointed the street after reporting earnings on Thursday after the bell.  Amazon finished down just less than 10%, finding support where it spent the majority of the month of June being supported by buyers. So even though 10% is a big single day drop, and one that causes significant technical damage, if we try to keep things in perspective, Amazon is trading down to prices that were last seen only 11 trading days ago. Going forward, just like we talked about with the upside gap in Facebook, we’ll want to see how much of this gap it can retrace. It’s potentially a good short term trading vehicle but I wouldn’t be taking any swing positions in this until I see more price action develop down here. AMZN

 

$TSLA here is a name that is tightening up in a 10 point range between 216 and 226 as the market awaits it’s earnings release this coming Thursday, July 31st. It looked like Tesla was about to get going to the upside on Friday when it made a run above resistance at 226 but that was quickly faded along with the rest of the market as the day went on. Long and intermediate term trends remain higher, but let’s see how that looks next week after Tesla’s report.TSLA15

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Evan Medeiros

Evan is the founder of the Trade Risk. With 20+ years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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