Stocks Fall Sharply On February 24, But Might Not Last As Gaps Fill Up

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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FEBRUARY 24, 2020

STOCKS: AMD, NVDA, AAPL, TSLA, ROKU

MACRO: SPY, EWY, EWG, EWH, GOLD

MICHAEL KRAMER OWNS SPY CALLS

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL, TSLA

Join me on February 27 at 12 PM ET for a FREE webinar hosted by Interactive Brokers. I will cover why I think the S&P 500 is rising to 3,600. Sign up

Stocks are falling around the globe on Coronavirus fears as uncertainties rise. What is the right answer to today’s reaction is difficult, because this happens to be one of those events that are hard to quantify, and that could be the biggest issue that the market will have.

Interestingly, based on the data that I saw last night, the number of new cases in China is falling. But that’s not going to matter much today, as investors focus on new cases in Italy and South Korea.

S&P 500 Futures

We can see on the charts that S&P 500 futures are down about 2.5% to 3,258, which are still just slightly higher than where we were on the January 31 lows. The RSI for ES has fallen to around 41, but the overall trends remain higher. I know that doesn’t sound comforting, but that what is. 

S&P 500 futures

S&P 500 (SPY) 

The S&P 500 based on the futures is likely to open around 3,256, which unsurprisingly fills the gap created from the February 4 gap up. How the market handles, that level will give us a perfect clue as to what’s next. A break of that level sends shares to the low of 3216.

S&P 500, spy

But part of me feels as if a sharp open lower may not last, and the market finds that bounce around 3,250. I guess I feel that way because we can see Germany is filling the gap, and it is finding some support around that region.

germany

You can basically see the same thing in South Korea, and testing the January lows.

korea,

China

…and china was hardly down.

china

Hong Kong also filled a gap as well.

hong kong

So will stock open lower, yes. How much further will they fall, I guess we can find out together. 

Gold

Gold has gone parabolic, and is heading towards resistance at $1700, and appears to be in the process of signaling a bearish divergence on the RSI. The worst thing that can happen is to race into gold, only for it to reverse the other way.

gold

Micron (MU)

Micron is falling today to support at $52.75. It is an essential level for Micron because after that level comes $48.75.

micron, mu

Tesla (TSLA)

Tesla is down slightly, and the stock has some support for around $850 and then $761. It is going to be interesting to see how this one trades today. Given the sharp run-up, one would expect to see this one down sharply. But for now, the overall trend is still higher.

tesla tsla

AMD (AMD)

AMD is falling below the uptrend today, and where the stock closes will be a big deal. The significant level to watch is $46.80. That is the level that was like a rock post-earnings, and a break of $46.80 means shares fall further to $43.

AMD

Apple (AAPL)

Apple is falling below $300 and could be heading to $290. Surprisingly, these were the levels we were expecting it to fall to last week but never did. Interesting.
APPLE, AAPL

Roku (ROKU) 

Roku is falling below $116, and a close below that price likely sets up that decline to $100, we have spoken about.

roku

Good luck today, it might suck, but we have been through this before, and unfortunately, we will be through at some point again. It happens, don’t fight it, don’t lament. Life goes on. I know it sounds complacent, but I have done this for 25 years, and it isn’t the first time I have seen, and it won’t be the last.

-Mike 

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.    

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