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MLR - Premarket Pulse January 25, 2013

The NASDAQ Composite gapped down on disappointing earnings from Apple (AAPL) then clawed its way back to near breakeven, but selling later took hold so it closed near its lows for the day, making for a sharp downside day with volume picking up. While the S&P 500 finished mid-bar and essentially flat for the day, the Russell 2000, which has been outperforming the other major indices and is comprised of small cap issues, fared the best, finishing up fractionally. Overall, however, the major market indexes outside of the NASDAQ showed some churning and stalling action on heavier volume. A number of big cap techs with strong fundamentals and technicals fared well, including stocks like Google (GOOG) and Amazon.com (AMZN), as money moving out of AAPL was likely redeployed into these names and others. Given the market's extended state, a pullback at any point would not be surprising, and is possibly necessary for the purpose of properly digesting strong gains in the process of setting up for further upside.

Apple (AAPL) is currently on a shortable gap-down signal, using yesterday's intra-day high of 465.73 as an upside stop-out guide. We discussed this pre-open yesterday, and the stock closed at the exact lows for the day. Our initial downside price target is the top of the next base from late 2011/early 2012 at around the 426 price level. The lows of this base, however, are down around 360, and it is possible that the stock could undercut these levels eventually.

Lumber Liquidators (LL) had a pocket pivot/breakout. We first reported on LL on January 18 when it had an earlier bona fide pocket pivot (see archives here: https://www.virtueofselfishinvesting.com/reports). Hosting provider Rackspace Hosting (RAX) cleared enough volume for a pocket pivot as it popped up and off of a tight sideways price area that formed along the 10-day moving average. Earnings and sales remain strong with 36% and 27%, respectively, in the most recent quarter. Institutional sponsorship has climbed over the last 5 quarters. We have reported on RAX in prior reports. Both stocks stalled a bit as they closed mid-range on the day which is understandable given that both RAX and LL have yet to announce earnings.

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