Author: Derek Higa

Derek Higa is a senior equity analyst and a lead for the APAC region and the Consumer Cyclical sector. He serves on the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets, and compiles Asia Watch, a weekly recap of regional investing news. Since joining William O’Neil + Company in 2005, he has lent his market expertise to alpha capture, product development, and historical studies on outperforming stocks. Derek graduated summa cum laude from California State University Los Angeles with a B.S. in Finance and Information Systems. He holds a Series 65 securities license.

APAC Market Update

Posted on by Derek Higa

Key points from this report:

 

  • We are upgrading India to a Confirmed Uptrend from a Rally Attempt after the Sensex staged a day-10 follow-through day. The index rose 1.6% on higher day-over-day volume. We will look for the index to hold above its 50-DMA and clear above resistance along 59,203 and 61,036.
  • In anticipation of continued market volatility, we recommend investors take a gradual approach to increasing risk in India. Focus on ideas that are breaking out of sound bases with an upward trending RS line. Refer to page 3 for ideas.
  • Over the past eight to 13 weeks, Technology and Capital Equipment have outperformed. However, today’s move was led by Financial and Transportation stocks.
  • Actionable Focus List ideas include Infosys (INE.IN; INFO IN), Larsen and Toubro Infotech (LR1.IN; LTI IN), Radico Khaitan (RKT.IN; RDCK IN), Allcargo Logistics (CLG.IN; AGLL IN), Tube Investments Of India (TF.IN; TIINDIA IN), and Pidilite Industries (PID.IN; PIDI IN)

Tesla

Posted on by Derek Higa

Key points from this note:

 

  • Tesla shares are forming right side of a stage-three consolidation base (pivot: $1,243.5) and attempting to break above resistance between $1,170 and $1,200. A break above $1,200 provides an aggressive entry to add to positions.
  • Shares regained momentum on strong Q4 delivery performance. It had a record quarterly delivery of 308.6K units (+71% y/y), beating estimates of 267K by 16%. This was its sixth consecutive quarter of record deliveries. Model 3/Y deliveries increased 84% y/y to 297K.
  • For FY21, it delivered 936.2K units (+87% y/y), beating estimates by 4%. The company had not provided specific delivery targets for the year. However, it has set a target of 50% average annual growth in vehicle deliveries over a multi-year horizon.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

  • The MSCI Asia ex. Japan index ( AAXJ ) found support off its recent low and retraced back to declining 21-DMA resistance. We continue to recommend a cautious approach. Reduce risk in stocks failing to hold above logical support levels or finding resistance along key moving averages.
  • Six markets are in an Uptrend Under Pressure, including Australia, China, and Japan. Four markets, including Hong Kong, India, and South Korea, are in a Rally Attempt. Taiwan, New Zealand, and Indonesia are in a Confirmed Uptrend.
  • While most major APAC markets are still vulnerable, Australia and Taiwan are among the best performing. They have a higher proportion of leading stocks trading above their 50- and 200-DMA compared with all major APAC markets. Furthermore, they have a higher percentage of stocks trading near 52-week highs and continue to have broadening breakout trends across the region over the past month.
  • Outperformance in Australia and Taiwan is led by mid- and small-cap stocks. Basic Material in Australia and Technology in Taiwan are among the leading sectors over the past four to 13 weeks. Also, Financial ideas in both markets are trading close to 52-week highs. Refer to page 15 for a list of near-pivot ideas in Australia and Taiwan.
  • Highlighted Focus List ideas: WiseTech Global ( WTC.AU; WTC AU ) and Chailease Holding ( CLI.TW; 5871 TT ).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia ex. Japan index has been trending downward since February highs and forming lower highs and lower lows. It is trading below all key moving averages and is 20% off highs.
  • Six markets are in an Uptrend Under Pressure, including China, Australia, India, and Japan; three are in a Rally Attempt, including Taiwan and South Korea; and India and Hong Kong are in a Downtrend. New Zealand and Indonesia are in a Confirmed Uptrend.
  • This week, we downgraded India to a Downtrend for the first time since March 2020. Net outflow of money from institutional investors is the highest since 2007 as foreign investors have been selling since April. Only ~20% of stocks are trading above their 50- and 200-DMA, compared with ~70% in mid-October. Weakness is across market caps and the number of breakouts has declined.

APAC Weekly Summary

Posted on by Derek Higa

Attached is an APAC Market Update from Director, Research Analyst Derek Higa and William O’Neil India Analysts.

  • We downgraded India to a Downtrend from an Uptrend Under Pressure as the Sensex declined 2% on heavy volume and registered its ninth distribution day.  Hawkish comments by central banks worldwide accompanied by increasing foreign institutional selling is contributing to poor technical price action.
  • The Sensex breached support at November lows of ~56,400 and has immediate support at its 200-DMA (-2.5%).
  • We advise investors to take a cautious and defensive approach. Avoid or trim positions in ideas that have broken logical levels of support on heavy volume.
  • Refer to page 4 for Indian ideas holding above support levels and page 5 for leading stocks that have broken key support and are now lagging.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia ex. Japan index (AAXJ) found resistance along its 50-DMA (+4%) and gapped down (ex. Dividend). It is trading at a 52-week low. We recommend a patient and cautious approach given the market weakness. Several markets remain choppy with near-term trends uncertain.
  • Six markets are in an Uptrend Under Pressure, including Australia, India, and Japan. Hong Kong, Taiwan, and South Korea are in a Rally Attempt. China, New Zealand, and Indonesia are in a Confirmed Uptrend. Malaysia is in a Downtrend.
  • Over the past eight weeks, Transportation, Utility, and Technology have outperformed based on average price performance. There has also been relative improvement in Transportation, Basic Material, and Utility over the past one to four weeks. Refer to pages 9 and 10 for a list of near-pivot ideas from these sectors.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

  • The MSCI Asia ex. Japan index ( AAXJ ) bounced off month-lows and is approaching 50-DMA resistance. We recommend a patient and cautious approach given the market volatility. We expect markets to remain choppy in the near term. Reduce risk in stocks failing to hold above logical support levels or are finding resistance along key moving averages.
  • Seven markets are in an Uptrend Under Pressure, including Australia, China, India, and Japan. Taiwan, South Korea, and New Zealand are in a Rally Attempt. Hong Kong and Malaysia are in a Downtrend. Only Indonesia is in a Confirmed Uptrend.
  • Leadership is narrowing across APAC with large caps outperforming relatively. Taiwan is the best performing market with 55% of stocks currently trading above their 50- and 200-DMA. Refer to page 8 for a list of constructive large-cap ideas.
  • Among sectors, strength is narrowing to Technology with Semiconductor Mfg and Computer-Data Storage outperforming among Tech groups.
  • Highlighted Focus List idea: Tokyo Electron ( RG@N.JP; 8035 JP ). Refer to page 7 for an annotated chart.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

  • The MSCI Asia ex. Japan index is testing multiple levels of support between $82–84. We advise investors to remain cautious amid high volatility and elevated distribution.
  • Seven markets are in an Uptrend Under Pressure, including China, India, and Japan, three markets, including Hong Kong, Malaysia, and South Korea, are in a Downtrend, while New Zealand and Taiwan are in a Rally Attempt. Only Indonesia is in a Confirmed Uptrend.
  • In recent months, there has been a surge in COVID cases in countries like South Korea, New Zealand, Australia, and Singapore despite achieving >70% vaccination. However, the mortality rate has remained ~1% in these countries aided by vaccination. Despite having low COVID cases and higher vaccination, Japan sold off the most this week driven by strict government restrictions following the new variant.
  • In APAC ex. China, India has the highest number of leading stocks. Many of which are extended and under pressure. However, leaders are largely holding up well outside of India. Among APAC sectors, Technology has the highest number of leaders with several remaining constructive. Leaders within small and mid-cap continue to trade constructively thus far despite the recent market pullback. Refer to pages 3-5 for more on leading stocks in APAC ex. China.
  • Highlighted Focus List Idea: Mercari ( MERA.JP ).

Alphabet

Posted on by Derek Higa

Key points from this report:

 

  • We are reiterating our buy call on Alphabet as the stock reclaimed its 50-DMA on heavy volume and is breaking out to a new high from a stage-three flat base following better-than-expected Q3 results. The company has seen continued strength in the advertising business driven by first-party data platforms. Google Cloud is another key growth driver. The stock has gained more than 65% since its addition to our Focus List in November 2020.
  • Excellent fundamental profile: EPS Rank of 97, SMR Rating of A, and Composite Rating of 98.
  • RS line is at highs with good RS Rating of 90 and A/D Rating of C+. Up/Down Volume ratio has been greater than one over the past few weeks, indicating money inflow.
  • The company has seen continued strength in the advertising business, aided by Google Search. It benefits from the first-party data that it collects from customers during site visits, while its peers have been impacted by Apple’s privacy changes, as they depend on third-party data for advertising.
  • Revenue from YouTube advertising almost doubled over the past two years. It has grown by strong double digits since Q3 2020 and was only impacted modestly by the iOS privacy change.
  • Google Cloud is another key growth driver. The company expects operating margin from Google Cloud to benefit from increased scale over time.