“We don’t care about ‘why’. Real traders only have the time and interest to care about ‘what’ and ‘when’ and ‘if’ and ‘then’.
Some interesting price action analysis
1. The Intel Problem ~ Fundamentals
Intel is one stock that consistently disappoints. The company came out with earnings and a statement that supply chain disruption remains an issue and would impact profitable growth. The stock is down 7% and now trading near the low end of the range. The Price Action
Technically, the stock can find support here but the issue is that due to a lack of fundamental triggers, there is no case for a big upside. That’s why when a stock has no trend, then one is better off avoiding it. Because you just don’t know how long the pain would last.
Intel is trading at forward PE of 13 but when the future looks uncertain, attractive valuation can cap the downside but does not guarantee the upside.
2. Should one buy AMD?
China has approved the $35 billion Xilinx acquisition by AMD. Good news…right
If there is one stock that has always rewarded- Buy the dips at support strategy, it has been AMD. But we are in a different market right now where everything is falling apart especially tech names. Technically, AMD is at 200 dma and hence a no-brainer buy but very few will venture out in the current market environment. The Price Action
In the Bear market, traders are punished for buying the dips near support. I like AMD but this is not the environment to buy tech stocks.
3. One simple lesson we can learn from Snap Price Action
It is never too late to sell even if the stock drops dramatically. Snap stock sold off sharply. Snap stock used to trade at $75 and one day it opened a gap down to $60. What would be your reaction? Hold right.
Now imagine even if you would have sold at $60, how better you would have been if you compare where Snap stock is today. Stop Loss matters because it stops the bleeding before it becomes unbearable.
4. The above chart is the reason I am not recommending Netflix
When a stock Gaps down on a bad earnings report, then one is better off avoiding it.
5. The stock with Earnings Momentum – Corning GLW
Corning, the company behind Gorilla Glass, came out with an Earnings report yesterday but the stock instead of closing high closed near the lows and today Goldman Sachs has upgraded the stock with a price target of $50. Now ideally the stock is a buy but in a current market environment will the gains sustain – I don’t know.
6. A Potential Opportunity – Dow Chemicals DOW
Dow Chemicals came out with a good earnings report and strong sales guidance for the current quarter. The company makes chemicals used in a range of products including food packaging, mattresses, textiles, and electronics, and thanks to supply chain constraints and strong demand, Dow is able to command higher pricing and hence sales.
As you can see in the chart above, DOW stock is right at the resistance but if by the close it manages to trade above 61.5, then it would be a good buy for some strong follow-through buying.
We are in a market environment where such trades can get rewarded. Dow is trading at forward PE of 9 which means it’s super attractive and its dividend yield is 4.89%.
Always remember, nobody knows what the market will do in the future for sure. All we can do is understand what it can do in the future.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers
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