Crox Falls; Apple and Google Coming Back! BAIDU Still a Short.

As expected, Crocs fell today despite blow out quarter further lending credence to my theory that the market is near the top. Crocs (CROX) as it reported $.51 per share fourth quarter income beating analyst concensus estimate of $.47. But the market had other ideas as the stock fell by $2.02 to settle at $53.98. My bearish strangle strategy worked out perfectly. I anticipate that the stock will challenge the 50 DMA soon.

Laggards as of late have been coming on stronger. Just look at the action of Apple (AAPL) today, ramping up $3.30 on slightly above average volume. This is based on news that Apple and Cisco (CSCO) have settled the iPhone trademark lawsuit. How about Google (GOOG)? It is coming back from the abyss near $455 and is now well over $470's at $475.86, up $3.76 today. It is ready to reclaim the 50 DMA again. How about Whole Foods? It is buying out Wild Oats (OATS) for a cool $565 million. It ramped up $2.24 to $47.94, possibly starting a new uptrend from the abyss. What about Valero (VLO)? It has made a strong break out of v shaped cup base and a handle today and rose $1.93 to $57.90 regaining above 200 DMA! The 50 DMA remains below 200 DMA and closing the gap fast!

What I am trying to show is that high momentum stocks trading near the 52 week highs are being taken out irrespective of the fundamentals or earnings. Nothing is good enough for the street. What seems to be working are the laggards that has seen substantial correction that used to have high momentum. Smart money appears to be heading into the beaten down former momentum plays. This has me convinced that the market may be near a top but the ultimate correction may not be for a while. So I will continue to watch for warning signs. As I said in my previous blog, I will engage in short term trades while building on short side of the trade with puts. The market is growing tired. There are some good short term long side trades available if you are nimble. I continue to watch Google, Apple, Valero, Chicos (CHS), CAT, and rig as ideal short term trade candidates on the long side as "froth" has been abated in these stocks.

I continue to remain bearish on Baidu (BIDU). Especially in this market condition. Expectations for high flying momentum stocks are now near its apex. Guiding down on future quarters is a no no. I believe based on today's action in BIDU, a good short entry position would be near $110, as I doubt that this stock will see that level any time soon. It would be more likely for this stock to see the low $90's before making any meaningful high volume led recovery. My strategy would be to buy 5 contract per week of BIDU $90 puts dated June 2007. This way I can cost average into a position while cost averaging into the contracts but if I am wrong, I can escape without much damage, especially if this stock decides to change its mind and scream higher.