US stock market stunned everyone with a big bullish move last week but it has destroyed all the bullish enthusiasm with a big down day yesterday. There is fear once again and today the market struggled for direction. The big question the market has to debate: is how dramatically the US economy has slowed down due to lower consumer spending. The US indices closed flat for the day with Apple, Microsoft, Amazon, and Facebook all up around 1.4%. These are the stocks that can now keep the sentiment neutral for the market.
Cruise stocks – Will they survive?
Cruise companies took on enormous debt during the pandemic to survive and now face a demand issue due to recessionary fears and cost issues due to inflationary pressures. These companies have real business survival issues and can they generate enough cash flow to service the debt? The market is right to be worried and investors/traders should stay away.
Southwestern Energy: Buy on Pullback stock
2022 has been a brutal year for the market but the Oil & Gas/Energy sector has outperformed every other sector by a wide margin. The ETF that has worked: XOP and XLE; and the stocks are 1. Occidental Petroleum OXY and 2. Exxon Mobil. One stock I like in the space is Southwestern Energy SWN, a natural gas exploration and production company. The Natural Gas prices in the US are at 14 year high and due to the Russia Ukraine war, the prices are expected to remain high. SWN is one of the best stocks to play this trend.
Just see in the chart below, how nicely the stock took off from 200 dma and levels of 5 and rallied near 10. Now the stock has pulled back on recessionary fears and one can look for support near 6.4 levels.
Bed Bath & Beyond – The stock continues to sink
People always argue against stop loss by saying how low a stock can go. I will hold it because it’s already down 50%. Bed Bath & Beyond was at $28 by the end of March this year and then by the end of April it was down to $14. Well, now the stock trades at $5.
The company posted weaker-than-expected first-quarter earnings and the CEO Mark Tritton tendered his resignation. The company posted a 27% decline in comparable sales (where are the consumers?)
Gold: Old Theories have collapsed this time
The only safe haven that has worked in 2022 is US Dollar. In old times, people used to buy Gold and Gold mining stocks during times of inflation and recessionary fears. But this trade has collapsed this time. Even the news of G-7, a group of representatives from several major industrial nations, banning Russian gold exports has not helped. Forget rally, GDX the Gold mining ETF has broken well-defined support.
Why do I like Trip.com?
Most of the Chinese stocks have bottomed out. They are showing sustained upmove which means they rally and then they pause instead of collapsing. Example: Alibaba and FUTU. China is loosening its covid restrictions and this seems to be helping this travel stock. The company also posted decent earnings.
On Charts, the stock has gapped up above 200 dma and sustained the gains for 2 days. I would buy the stock with a stop loss below 24.
The Sectors the market likes
- Large Cap Pharma
- Speculative Biotech
- Chinese stocks
- Oil and Gas
Bellus Health [Speculative Biotech] – Breakout momentum: Will it work?
We are in a hostile trading market environment and nobody knows what lies ahead
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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