Trex (TREX) – $9B market cap; $71M ADV: We added Trex to the U.S. Focus List as the stock is breaking out of a stage-two base and is actionable here. Trex is the largest manufacturer of composite wood-alternative decking, railing, and
fencing products in the U.S. The company generates 90% of its revenue from remodel and repair (RR) demand. The low inventory of homes and rising average age of U.S. housing stocks should drive RR market demand. The composite decking
and railing market has a huge conversion opportunity of 66–75% from the traditional core market, which should benefit Trex. The company has an industry-leading distribution channel, with exclusivity at some retailers like Lowe’s and Home Depot
offering strong brand visibility. Consensus expects revenue and EPS CAGR of 11% and 17%, respectively, in FY23–25. Fundamental & Technical note
Author: Deepashree MC
Won Europe Today
Yesterday,
- European markets slid marginally as investors continued to weigh Germany’s weaker-than-expected industrial
production in November against the rally in Asian markets. We expect markets to remain choppy until Thursday as
investors await the U.S. inflation print for December 2023. - The Stoxx 600 declined 19bps to close below its 10-DMA. The index has additional support at its 21-DMA (17bps
below). It is expected to consolidate between 482 and 472 until we get a clear indication following the U.S. CPI print
on Thursday. It remains extended from its key support levels (50-, 100-, and 200-DMA). We recommend that
investors book profits in extended names. Be selective in adding top-rated names that are breaking out of proper
bases and wait for the rising 50-DMA to catch up. - Sectoral performance was weak. Mining, Retail, Financial Services, and Banking were among the worst laggards,
declining 146bps, 102bps, 96bps, and 87bps, respectively. Health Care rallied 53bps and Utility gained 27bps. - All three major indices closed in the red. France’s CAC 40, Germany’s DAX 30, and the U.K.’s FTSE 100 fell
32bps, 17bps, and 13bps, respectively. The CAC continued to face overhead resistance from its converging 10-
and 21-DMA. The DAX was running into resistance at its rising 21-DMA. - Of the 16 indices we track, only Austria, Denmark, and Switzerland had a positive session. With six indices
recording a distribution day each, the average distribution day count stood at 3.1. - Actionable names in the Focus List are Adidas (ADSX.DE; ADS:GR), Bae Systems (BA.GB; BA/:LN), Ferrari
(RACE.IT; RACE:IM), Inditex (IND.ES; ITX:SM), Recordati (REC.IT; REC:IM), Siegfried (SFZN.CH; SFZN:SW), and
Trigano (TRI.FR; TRI:FP).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. Indices posted upside reversals yesterday, with the S&P 500 closing 15bps
lower while the Nasdaq closed marginally higher. Both indices are trading slightly above their respective 10-DMA (4,735/14,777). On the
downside, support for the indices is near July 2023 high (4,607/14,447), followed by the rising 50-DMA (4,563/14,247). The distribution day
count stands at six and three, respectively, with one expiring on the S&P 500 tomorrow after close.
Won Europe Today
We released our European Weekly Summary today. Click here to access the report. Key points from it include:
- Sectoral performance was mixed. Health Care gained the most, while Consumer Cyclical led the decline.
- On our rotation graph, Financial, Capital Equipment, Health Care, Transportation, and Retail are showing
improvement in their short-term momentum. Energy, Technology, and Utility are showing a decline in their shortterm momentum.
Won Global View
The U.S. market remains in an Uptrend Under Pressure. Indices posted strong gains yesterday, with the S&P 500 and Nasdaq gaining
140bps and 220bps, respectively. The S&P 500 is back above resistance at its 10-DMA (4,746), while the Nasdaq is testing resistance at
its 10-DMA (14,850). On the downside, support for indices is near July 2023 high (4,607/14,447), followed by the rising 50-DMA
(4,551/14,202). The distribution day count stands at six and four, respectively, with one distribution day expiring on the Nasdaq today after
close.
Won Europe Today
On Friday,
- European markets ended the first week of 2024 lower as investors monitored the economic data coming in to
consider if the economic cooling warrants the rate cuts estimated. Inflation continues to plague the Eurozone as
Friday’s figures denoted a 2.9% annual inflation rate in December 2023, up from 2.4% recorded in November 2023,
a first in the past seven months. Inflation has come down significantly from the highs of 10.6% registered in
October 2022, which led to analysts predicting cuts being initiated as early as March. However, with the recent
reading, the timeline could be extended up to June. - The Stoxx 600 had a volatile session. The index declined below its 21-DMA before paring most of its mid-session
losses and ending 27bps below Thursday’s close. It now sits 24bps below its 10-DMA but has additional supportat
its 21-DMA, 26bps below. Following a strong rally initiated in November 2023, European indices are taking a
breather. The Stoxx 600 consolidated between 482–472. It remains extended from its key support levels (50-, 100- ,
and 200-DMA). We recommend that investors book profits in extended names. Be selective in adding top-rated
names that are breaking out of proper bases and wait for the rising 50-DMA to catch up. - Sectoral performance was weak. Chemicals, Retail, and Food & Beverage fell 109bps, 97bps, and 62bps,
respectively. There were pockets of growth led by Banking (+50bps) and Utility (+32bps). - All three major indices closed in the red. Germany’s DAX 30, France’s CAC 40, and the U.K.’s FTSE 100 declined
14bps, 40bps, and 43bps, respectively. The CAC faces overhead resistance from its converging 10- and 21-
DMA(1.3% above). Its rising 50-DMA still remains 1.8% below. The DAX remains even more extended from its 50-
DMA (3.3% below) and faces overhead resistance from its declining 10-DMA (46bps higher). Theindex could find
support near its mid-June and late July highs, 1.1% below. The FTSE breached its 10-DMA but found support at its
rising 21-DMA, 64bps below. - Except four, all the 16 indices we track had a negative session. With none of the indices recording a distribution
day, the average distribution day count stood at 2.7. - Actionable names in the Focus List are Bae Systems (BA.GB; BA/:LN), Beiersdorf (BEIX.DE; BEI:GR), Bridgepoint
Group (BPT.GB; BPT:LN), Ferrari (RACE.IT; RACE:IM), Inditex (IND.ES; ITX:SM), Recordati (REC.IT; REC:IM),
Safran (SGM.FR; SAF:FP), Siegfried (SFZN.CH; SFZN:SW), and Ypsomed (YPSN.CH; YPSN:SW).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. Indices pulled back off highs on rising distribution last week. The S&P 500 is
testing its 21-DMA (4,692) while the Nasdaq breached this short-term moving average (14,673). The next level of support for the indices is
near the July 2023 high (4,607/14,447), followed by the 50-DMA (4,540/14,162). The distribution day count stands at six and four,
respectively, with one distribution day expiring on each index this week.
Won Europe Today
We released our Weekly Global Laggards Report today. Click here to access the report. The stocks highlighted in this
report are laggards relative to their own domestic markets. We recommend that they be underweighted as they may be
vulnerable to further downside risk and underperformance. Stocks in Europe include David Campari Milano (CPR.IT;
CPR:IM) and Scor Se (SCO.FR; SCR:FP).
Won Global View
The U.S. market was shifted to an Uptrend Under Pressure. The S&P 500 declined ~35bps on higher d/d volume, breaching its 21-
DMA and adding its fourth consecutive distribution day, while the Nasdaq declined ~55bps on lower d/d volume. Immediate support for the
indices is near July 2023 high of (4,607/14,447), followed by the 50-DMA (4,531/14,134). The distribution day count on both the indices
stands at six and five, respectively, with one expiring on the Nasdaq today after close.
Won Europe Today
Yesterday,
- European markets ended in the red. The Stoxx 600 and other major indices either tested or breached their 21-DMA.
Luxury stocks fell on expectations of a weak earnings season. Among sectors, Health Care gained the most, while
Construction & Material and Financial Services led the decline. - We recommend that investors add risk in stocks that are a part of leading industry groups and are breaking out of
proper bases with a strong and rising RS line. - The Stoxx 600 closed 0.86% lower on above average volume. The index breached its 10-DMA and is testing
support at its 21-DMA. It has taken a pause over the last couple of weeks near its prior resistance level of 480. - Support levels: 21-DMA (its current levels), 200-DMA (3.5% below), and 50-DMA (3.5% lower). Next levels of
resistance: 480 (1.2% above), 485 (2.2% above), 490 (3.3% above), and 495 (4.3% above). - Among major indices, Germany’s DAX and France’s C have breached their 21-DMA. The U.K.’s FTSE was trading
above all its key moving averages. - Among the 16 indices we track, closes were mostly in the red. Sweden declined the most, down 1.6%. Thirteen
indices are in a Confirmed Uptrend, two in an Uptrend Under Pressure, and one in a Rally Attempt. - Actionable names in the Focus List include Recordati Indua. Chimica (REC.IT; REC:IM), Adidas (Xet) (ADSX.DE;
ADS:GR), Safran (SGM.FR; SAF:FP), Swedish OrphanBiovitrum (SOBI.SE; SOBI:SS), Trigano (TRI.FR; TRI:FP),
Siegfried‘R’ (SFZN.CH; SFZN:SW), and Beiersdorf (Xet) (BEIX.DE; BEI:GR).
