The Long And Short Of It: CME, FSLR, AAPL, NFLX, GES

Following a better than expected initial claims report this morning, the stock market started the day on a high note. Unfortunately, the major averages were unable to sustain the upward momentum, sliding lower throughout the afternoon as the SPDR Dow Jones ETF (NYSE: DIA) finished the day down 0.7%. The Dow Jones Industrial Average finished below the key 10,000 mark, an ominous sign. While nearly 60% of all issues finished down on the day, there were still some notable winners today.

Shares of CME Group (NYSE: CME), for instance, traded higher by as much as 3% today, closing 5 points higher to $250.92 per share. There wasn’t any company-specific news to account for the strength, although the stock was upgraded to Outperform with a $320 at Credit Agricole – a sizable 28% above where it closed today. Today’s upward action builds on yesterday’s convincing move higher in which it blasted through resistance at the $240 mark. The stock is currently trading at a resistance level, however, at $250. Traders and investors interested in entering a position in CME would be advised to first review our free trading report on CME.

Another stock that displayed relative strength today was solar module maker First Solar (Nasdaq: FLSR), which closed up 1.4%. This was an interesting move because most of the other solar stocks did virtually nothing today, as indicated by the Claymore/Mac Global Solar ETF (NYSE: TAN) ending the day essentially flat. Shares of FSLR had been on a tear from early June through late July, but were smacked down on July 30 after the company reported its second quarter results and issued FY10 guidance. While its EPS and revenue figures were well ahead of the Street’s expectations – which is common for FSLR - EPS declined 13% year-over-year and its sales growth decelerated to 12% from 36% in 1Q10 and from 48% in 4Q09. Furthermore, its inline guidance didn’t elicit much excitement from investors and traders. Since FSLR issued quarterly results, shares have chopped around the $125-$126 level, but it made an attempt to break above the $130 resistance level on August 23. Today, the stock once again threatened to break out above that area, but was swiftly knocked back down. For more key levels of interest, click here to access our free trading report.

Online DVD rental provider Netflix (Nasdaq: NFLX) put it solid gains today as well, up 1.3%, after the company announced before the open that its free Netflix App for Apple’s (Nasdaq: AAPL) iPod and iPhone is now available. This allows members to watch a selection of TV episodes and movies streamed to those devices at no additional charge. This positive news builds on its successful, continued transition to instant streaming of content, which has provided a tailwind to its margins and earnings. Last quarter, for example, NFLX’s profits climbed 48%, driven by a 530 basis point improvement in gross margin. Initially, the stock sold off following these results as investors were disappointed by the slight revenue miss and inline Q3 and Q4 guidance. However, the stock quickly rebounded and shot higher by ~36% from late July to mid-August, before cooling off over the past week. Today’s reversal ran the stock up against its 50-day moving average, which acted as a barrier to further gains.

Unfortunately, there were plenty of stocks today that made considerable moves to the downside. The stocks that we chose to highlight are apparel companies Guess (NYSE: GES), which fell nearly 11% on the session, and peer Polo Ralph Lauren (NYSE: RL), down about 5% on the day. After the close last night, GES issued second quarter results and also provided FY11 sales and earnings guidance. As has been a familiar case, the issue for GES wasn’t the second quarter numbers, it was the guidance. Specifically, it was the downside EPS guidance that had investors and traders running for the exits. The discouraging forecast sent shares tumbling towards a $34 support zone, but there may further downside ahead. To get a better gauge on key entry and exit levels, click here to access our free trading report.  

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