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Market Lab Report - Premarket Pulse 9/27/16

Major averages pulled back yesterday on lower volume on the second day of a sell-off that began on Friday. Currently, the NASDAQ Composite has failed on last Thursday's breakout to all-time highs as it falls back into its prior consolidation.

Growing concerns about Germany's largest bank, Deutsche Bank (DB), continue as it faces a number of headwinds including the prospect of a $14 billion fine from the U.S. Justice Department. Back in June, the International Monetary Fund described Deutsche Bank as the greatest risk to the global financial system as not only is its sheer size a concern but it is also highly interconnected among global systemically important banks, or GSIBs.

“If Deutsche has to raise cash, and if it has trouble doing so, credit conditions in Germany could tighten,” said Carl Weinberg, chief economist at High Frequency Economics, in a note. “This is not what we might hope to see in a weak economy.”


PI had a constructive, lower volume pullback to its 20-day moving average.

ACIA announced a secondary offering and sold off 12%. Stocks typically pull back a few to several percent on such days. As we have advised before, such a gap lower is not normally a negative news event. ACIA is a relatively new stock so it is not unusual to do a secondary offering given its prior upside run and price appreciation. One could wait for the offering to price before making any moves on the stock. Alternatively, should ACIA demonstrate constructive price/volume action in the days ahead, ACIA could become actionable ahead of its offering price. ACIA crushed earnings in its last earnings report. When such a stock demonstrates such strong fundamentals and technicals, use a constructive pullback as a buying opportunity. 

TWLO may be another stock likely to announce a secondary offering given its post-IPO performance. It has been acting well, as of late, but we would still be inclined to sell into strength rather than chase it. TWLO was buyable much lower in its pattern and well before this current breakout attempt as we have discussed in recent reports on the stock.

TLND had a pocket pivot. However, TLND was perhaps best bought on the undercut & rally set-up we mentioned in our weekend Focus List Review.

MOMO pulled back to its 20-day moving average on lower, constructive volume.

Keep in mind that pullbacks allow for lower-risk entry opportunities, not "no-risk" entry opportunities. If one purchases shares near a potential area of support such as a major moving average or the top of a prior base, for example, then that should be used as a guide for a tight downside stop. This is of paramount importance, and stops should be adhered to since it is never clear how far and how long any market pullback will continue.

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