Constellation Energy Corp (CEG) – $25B market cap – Technicals: The stock broke out of a stage-two 15-week
consolidation last week. It has low fundamental ratings like EPS Rank 32 and SMR Rating of D due to one-off business
disruption in 2021.
Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Global Sector Strategy
Key Points:
- Looking at three past major U.S. corrections/bear markets and how stock breakouts relate to confidence in a new and sustainable uptrend.
- 2018-19:
- Four months of low breakout numbers from Sep. 18-Jan-19. First above average total in Feb. ’19, but first major spike not until July ’19 (7 mo off lows).
- Six months of below avg breakouts from mid ’15 to early ’16. ‘Head fake’ in decent number in late-215 but not sustained. First major spike in July 2016 (5-mo off lows).
- Six quarters of below avg breakouts from Q4 ’07 to Q2 ’09. Two ‘head fakes’ in bear rallies in April/Sep ’08. First major spike in July ’09 (4-mo off lows).
- Currently, four months below avg breakouts. First near return to avg in past two weeks. But likely weeks away from major spike, at best.
- In meantime, focus on more rare breakouts and pay attention to groups that contain more rare breakouts. See attachment for ‘Rare 5yr New High’ stocks.
O’Neil Energy/Material Weekly
Albemarle (ALB) – $28.1B market cap – Technicals: The stock is forming the handle of a stage-one, 36-week cup-withhandle base and is trading 18% off highs. It has immediate support at its 200-DMA. Investors can look for an aggressive
entry on close above the resistance level near ~$248. Ideal entry point is pivot price of ~$274. Strong fundamental profile
with an EPS Rank of 72 and Composite Rating of 98. SMR Rating of C is expected to improve, aided by strong sales and
margin expansion in FY22. Technical profile is improving with RS line starting to trend upward. RS Rating has improved to
90 from 76 and Industry Group Rank improved to 52 from 86 in the past four weeks. Institutional sponsorship increased
~20% y/y to 1,760 as of June
O’Neil Energy/Material Weekly
The iShares S&P Global Clean Energy ETF (ICLN) represents companies from several areas of renewable energy.
These include solar and wind producers and product makers, service companies, as well as hydrogen-related names.
While not as expansive as the First Trust Nasdaq Clean Energy ETF (QCLN), which includes the EV supply chain, ICLN
is one of the brightest growth spots in the market. It is one of very few formerly-leading groups which has resumed longterm leadership (RS line vs S&P 500 at 52-week highs).
Global Sector Strategy
Global Sector Strategy
Global Sector Strategy
Key Points:
- Continuation of rally this week. S&P 500 now at +10.5% from lows to highs, still below ~12% average bear rally but now equal in terms of time (35 days).
- Laggards led…stocks between 20-60% off highs had the best 5-day gain. But, below 70% from highs, averages trailed off again.
Global Sector Strategy
Key Points:
- Fifth FTD on S&P 500 intact, with prior four having failed.
- Prior four avg. a 3% gain post-FTD to highs, and overall gain of 9% from lows to highs.
- This is well below average 5% post-FTD and 12% overall bear market rallies historically.
- An average bear rally would take the S&P 500 up to ~4,070..while the 100-DMA would be a +14% move from lows.
- Currently sitting in middle of lows and highs from FTD on June 24, with 4 distribution days. Not good action despite Friday gains, but has held onto lows.
- Nasdaq/ARKK comparison checkup:
- After first two similar legs in length and magnitude of fall and counter-trend rallies, Leg 3:
- Nasdaq: Jan-April 2001, -44% drop over 11 weeks (-28% after breaching prior low), followed by 44% bounce over 8 weeks to lower highs.
- ARKK: April-May 2022, -51% drop over 7 weeks (-32% after breaching prior low). So far, a 35% bounce over 8 weeks.
- A 50% move from lows on ARKK would take it to 100-DMA, where Nasdaq topped in Q1 2001 bear rally.
O’Neil Energy/Material Weekly
Verbund (VERB.AT; VER:AV) – $18B market cap – Technicals: The stock is about to break out of a stage-one
consolidation base to all-time highs. It has best-possible fundamental ratings like SMR Rating of A and EPS Rank of 99,
strong technical ratings like A/D Rating of B+, and RS Rating of 93. Pivot range €103-111. Company description:
Verbund is Austria’s leading electricity provider and one of the largest hydroelectric producers in Europe. It has 129
hydropower plants, two thermal plants, six wind farms (excluding Equity interests), and five solar farms (under
operation/development).
Global Sector Strategy
Key Points:
- This week, CPI data should be a key tell for the next direction in the market.
- Of the last eight releases, it has come in above estimates seven times.
- Average day-of change is -1% for those 7.
- Average forward four-week gain is -2% after all eight releases. Max four-week average gain is 2%, max average loss is -7%.
- It stands to reason that winners since CPI became a major issue would continue to do well should the figure come in hot again (Oil & Gas, Food/Beverage, Utility, Discount Retail, Diversified Medical).
- Should it miss finally, major losers (Software, Semis, Apparel, Autos, Leisure Service) could see the most significant bounces.
O’Neil Energy/Material Weekly
Edp Renovaveis (EDPR.PT; EDP:PL; $23.2B market cap) – Technicals: The stock is forming the right side of a
stage-two cup base and is trading above its key moving averages. It is 5% below its pivot level of €25.09. Technical
ratings have seen improvement in the last three weeks: RS Rating jumped to 71 from 53, A/D Rating to B+ from B, and
Up/Down Volume ratio to 0.9 from 0.6. Company Description: EDP Renováveis is the fourth largest generator of wind
energy globally, along with a smaller portfolio of solar energy, operating in three broad geographic regions – Europe, North
America, and South America
