9:00am (EST)
The bulls continued their charge towards resistance following last week’s drubbing by the bears. The market got a good jump out of the gate on Tuesday after better-than-expected economic news and M&A excitement but stayed in a tight range until late in the afternoon. The final hour of trading has been exciting over the past few weeks and the tone favored the bulls heading into the close.
The Dow traded to a high of 12,781 before finishing with a gain of 75 points, or 0.6%, to 12,760. The index still had trouble with our 12,800 resistance target but managed to close above its 10-day MA (moving average). The 52-week high for the index is 12,876 which was hit last week on the fluff but a run towards 13,000 over the near-term is still in the cards once the bulls clear resistance.
The S&P 500 added 10 points, or 0.8%, to finish at 1,357 and, more importantly, closed above the 1,350 level which mentioned yesterday. This was a nice mental win for the bulls as well and should get the index back near our resistance target of 1,375 with a chance for a pop up to 1,400, if broken.
The Nasdaq once again led the way higher as it added 29 points, or 1%, to settle at 2,871. We were looking for a close above the 2,850 level and the index kissed a high of 2,873. The 52-week high is 2,887 which was also hit last Monday and yesterday’s Microsoft (MSFT, $25.67, down $0.16) news clearly showed that Tech companies are ready to spend to keep up with the mobile boom.
It’s been all downhill for Chinese social networking operator, Renren (RENN, $14.75, down $1.28), since their splashy IPO debut last Wednesday. The stock surged to a high of $24 on its first day of trading after opening at $19.50 and above its offering price of $12-$14. The 75% pop sucked in a lot of chasers at the highs and it has been a classic pump-and-dump since.
We recall a troublesome sign the day Renren went public when their CEO said there was a “typo” in their prospectus AND we had read that the company’s audit committee was a little shaky. Not good signs.
Initial Public Offerings (IPO’s) usually take a few weeks (or months) to list options and we are eager to see them start trading because we have a feeling Chinese Internet stocks will continue to be volatile. Renren is making huge moves in just its first week of trading and we are hoping that trend continues until the options list.
There will be bulls of the stock who say Renren has brand recognition and that there is value. The bears can point to the flood of social media sites planning on going public and say we are in a bubble or top.
Either way, as option traders we like price action and shares of Renren seem to have it.
As we head to press, futures look like this: Dow (-3); S&P (-1); Nasdaq (-3). We have a lot more to cover in our Members Area this morning so let’s get on it.
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