Good morning and welcome to our Market Pulse column!
We had a strong end of the week for US stocks which posted their best 4-day rally since the Covid lows. The rally was led by tech and growth stocks which have been also been the most oversold sectors. Stocks such as $NVDA, $TSLA, $AMZN managed to get above their respective downtrends and gave one push higher into bigger resistance areas. The overall indices are now in overbought territory and it becomes less attractive to chase in such a situation. There are still however plenty of opportunities for individual stocks to outperform if the market digests this current move for a few sessions.
$AMD and $AAPL are on our radar. They are still lagging the overall market rally despite being well off the lows. For the tech giant, we are still expecting a strong move over $168 to confirm that the recent bounce is something more than an oversold rally. Similarly, $AMD needs to play some catchup to $NVDA which had an explosive move. Watch $110 as active support and see if it can get above $115 for confirmation.
The geo-political situation remains tense as Russia and Ukraine seem to be having difficulties reaching a compromise. President Zelensky has been active over the weekend calling for peace talks with Mr. Putin. There are still plenty of disagreements when it comes to territorial integrity, non-interference, EU adherence and safety assurances. The longer this war continues the higher the probability both sides will end up losing. From an economic perspective, the war has a great toll on Ukrainian infrastructure as well as Russian stability on the international arena. The economic sanctions will have long lasting effects both on the ruble as well as on the entire financial and market structure of Russia.
Futures are currently down small after Friday’s impressive close which was a classic short squeeze. Traders missing out on the last few days’ rally were buying all dips, while those shorting the market had to cover their positions at a loss thus accelerating the last hours rally. For today, we expect some type of an inside day given the wide ranging candles. For the indices, see if we manage to hold $440 for the $SPY and $347-50 for the $QQQ. In case the market does hold last week’s gains, we expect a few stocks that showed good relative strength to have a push higher as is the case with $FB, $PYPL, $NVDA, $AMZN and $TSLA. Keep an eye also on $GOOGL which is once again above $2700.
We are in no rush to buy a dip until we see some market discovery first. Wait for a 15-30 minutes period before trying to buy or add to your existing positions. Crypto is a bit softer this morning but still re-building within the recent channel. We will be adding to our Bitcoin exposure as long as it holds $40K. Most dips should be viewed as good buying opportunities as a move above $45K becomes more likely in the next sessions.
$NKE reports tonight. It will be interesting to see if the recent surge in Omicron in the US had a lasting impact on the last quarter. Also, look at the guidance numbers for next quarter to grasp the way in which inflation is denting into consumers’ spending.
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