Late last week I sent a chart of Apple to a buddy of mine. The chart was simple. It showed AAPL in an 11-day trading range. On occasion, you can see the line in the sand that has been drawn to show where the big boys are defending a stock. On AAPL, that level is about $180.
The next morning, UBS “Upgraded” AAPL and raised their “Target Price” to $265. I am not smart enough to tell you where the price of a stock will be on 10/02/2010… Neither is the UBS “Analyst”. He isn’t really telling you that the price will be at $265 in a year. He is trying to support the price of AAPL and doesn’t want it to break $180.
Do you really think it is a coincidence that the upgrade came out when AAPL was on the verge of breaking $180? The “Upgrade” was done to drive buying and Short Covering. We’ll see if it works. $180 needs to hold. $187 needs to hold if you are Short AAPL.
Goldman Upgrades Banks Today
Goldman did the same thing today with the Bank stocks. The Banking Index closed below the 50-day on Friday and then gapped up above the 50-day on the Goldman Upgrade. That is the game.
When the big boys no longer open up their wallets to defend obvious support levels, then the game is over. All I can do is identify these levels and get defensive when support is ultimately broken or rebuy when resistance is taken out.
Wells Fargo was specifically cited by Goldman today. See how WFC closed Friday well below the 50-day (Black Line) and right at support (Blue Line)? After the upgrade, WFC opened just above the 50-day and closed 4 cents below the 20-day. Volume was down 20% today, so it was easy to jam the Futures higher with the lack of volume. What a scam…
I love these multi-week pullbacks, because they allow leadership to set up in new bases and give me new potential entry points. I already mentioned AAPL and you know that I am eyeing KBE above $24.
I looked at the charts of the IBD 100 over the weekend and I like how the charts of 24 of them are setting up.
I will look for rotation out of early stage leaders (Financials, Technology and Transportation) into later stage leaders (Industrials, Materials, Energy).
September ISM (Institute for Supply Management)
Today’s ISM Numbers were nice improvements over those of August. They indicated the first expansion in 12 months. But the number that really popped out at me was that of Prices Paid. Prices Paid fell from 63.1 in August to 48.8 in September. Holy cow!
What this means to me is that the Fed must keep jamming cash into the system to Deflation from taking control and blowing up the pricing of Debt. Cheap cash allows for massive speculation and we know what that has done to the pricing of risky assets.
Gold rallied $14 in the hour after the ISM numbers were released. Crude rallied 3%.
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