US stocks to re-open in the red; eBay and Nike in focus

Summary:

• NYSE and NASDAQ both set to open after bank holiday

• US500 drops back further to trade near 2626

• Ebay and Nike shares rising in the pre-market

After being closed yesterday due to a bank holiday, the US stock markets will open for the first time this week significantly lower than where they ended on Friday. The US500 was trading around 2670 on the closing bell at the end of last week, but the market has since dipped below the 2650 level and the cash market is set to open with a sizable gap lower. Price has pulled back to the lower Bollinger band on H1 which is not far from the 2646 level where the market broke out higher from on Friday. This could be seen as a key line in the sand going forward and as long as price doesn’t fall below here then a move back towards 2676 is likely. Should price drop below 2646 then it will be a blow for longs, but until the market makes a clean break below 2626 then the uptrend seen in recent weeks remains largely intact.  

The US500 has pulled back in recent trade after some strong gains. The market is now near the bottom of the Bollinger band and possible support resides around 2646. Source: xStation

One stock making the headlines ahead of the opening bell is eBay, with shares surging higher by as much as 10% in pre-market trade from Friday’s closing level. The catalyst for this rally comes from news that activist hedge fund Elliott Management has amassed a $1.4 billion stake in eBay, which represents over 4% of the firm’s shares. In addition to the announcement, Elliot also wrote an extensive letter of recommendations for the company’s future.  The fund’s “Enhance eBay Plan” suggests the company spin off StubHub as well was eBay’s “portfolio of Classifieds properties,” as Elliott said the assets “are worth meaningfully more than the value currently being ascribed to them as part of eBay.”

Shares in eBay are called to open sharply higher by as much as 10% this afternoon. The stock has been in a downtrend for most of the last 12 months, but the announcement of a sizable stake from an activist hedge fund could spark a turnaround in the market. The 38.2-41.4% fib of the decline from 34.07-34.74 is the next level to look to above while Friday’ close of 30.87 could be seen as possible support on any dips. Source: xStation

Another US stock to keep an eye on this afternoon is Nike, with the sportswear giant making gains in the pre-market after an upgrade from Cowen which now rates the stock as outperform from market perform previously. The reasons behind the bullish rating are that upcoming products this year are seen as boosting the margins. Cowen also raised its 12-month price target for Nike to $90 from $80, which would translate to a 13 percent gain. Shares of Nike climbed 1 percent to $81.16 in pre-market trading on Tuesday.

“Prospects remain solid for continued higher full price sell through and average selling price lift, which could drive gross margin above expectations,” Cowen’s John Kernan wrote in a note to clients on Tuesday. “We view Nike gross margin and the concept of Speed as key catalysts to near-term and multiyear upside to gross margin and the company’s path to $5 in earnings per share and potentially $6 billion in free cash flow.”

Nike shares have held up relatively well in the broader market rout and the stock remains above its 200 day SMA. Price pushed higher last week and broke above prior resistance around 78.85 and is called to open higher again this afternoon after the Cowen upgrade. All-time highs from September are 86.10. Source: xStation