Watchlist 16th February 2022
Yesterday the equity markets headed higher on relatively low volume across the board with most of the euphoria happening pre market. So whilst some charts appear to look good and the indexes appear to be reclaiming they must be approached with caution. This move still indicates signs of weakness rather than strength.
Inflation is real, a lot of names are still being valued at high multiples and war fears regardless if they’re warranted are not are playing a part.
QQQ still remains below the trend line and below the 200ma indicating bearish sentiment. We’ve only managed to close above this region once since the 20th January which ended with a huge gap down. Until we break the 200ma on convincing volume it’s likely we just chop in range or head lower.
Spot Gold continues to hold it’s breakout from $1,845 after multiple retests of the $1,850 region. This is the first time we’ve broken out of this flag and held in 2 years. With inflation woes and war fears circulating I’ll be looking to stay in unless my stop loss is hit ($1,838). This could potentially be a huge trade with a target of ATHs. However the move will likely take weeks if not longer to play out.
$FB – Currently down 42.66% from highs and back to pre covid levels on an extremely oversold move. To give you an idea of the basic fundamentals from then to now:
29th Jan 2020 – Revenue $21.08b & EPS $2.56
02 Feb 2022 – Revenue $33.671b & $EPS 3.67
Whilst it’s clear investors were unimpressed with the decrease in users it’s clear the company is having no issues increasing revenue. It currently trades at a P/E ratio of 16 compared to $SNAP 77 and $PINS 22.
Its return of equity sits at an aggressive 31% with EPS growth rate at 25%. The highest of any social media platform.
Technical wise it’s obvious we’re oversold, however the reason I’m starting to pay attention now is due to a bottoming process occurring. We have a strong triple bottom against $215 and continue to see 2x RVOL every day when compared to pre earnings. Indicating that even 9 days after earnings a lot of attention surrounds the name. Investors are clearly anticipating a move. Every time we drop below the $219 region volume dries up which indicates selling pressure is immediately reduced.
The entry I’m looking for is very clear. I want to see a break of the previous days high which so far we keep failing to hold. The move needs to be made on aggressive volume to show buyers are present. If this happens it’ll be a clear change in character thereby providing us with an edge.
Therefore for me, the line is $223.20.
Aside from Gold and Facebook I’m not liking much else. Semi conductor names look good with strong volume comparative to the market, however $NVDA earnings on Thursday will have a large impact. I don’t want to be trapped should they miss or simply receive a bad response.
The market as a whole is still weak within this range. Focus on where the Volume is as it’ll indicate where the attention is.