Edp Renovaveis (EDPR.PT; EDPR:PL) – $25B market cap – Technicals: The stock is trading constructively along its
rising 50-DMA. It has solid fundamental ratings like SMR Rating of B and EPS Rank of 73. Technical ratings are decent
indicating normal money flows with RS Rating of 64, Up/Down Volume ratio of 1.1, and A/D Rating of D. An aggressive
entry could be a high-volume bounce off its 50-DMA (currently €22.4). Company Description: Edp Renovaveis (EDPR)
is a Spain-based world’s fourth largest wind p
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 Commentary
Key points from this report:
- The U.S. market still in an uptrend as the S&P/Nasdaq drop 2-3% but remain above their 10-WMA. However, small caps are in correction after a breakout from the three weeks’ prior failures.
- The VIX volatility measure spiked to its highest level since February, testing highs of a downtrend line. We are looking for volatility to ease quickly in order to regain confidence, while a break above 30 could mean a move back toward 40.
- International indices (EFA, EEM, IEV) are worse off, dropping 4%+ and breaching their 10- and 40-WMA. All have RS lines at all-time lows versus the S&P 500.
- Stocks holding up this week and already with strong short/long-term RS Ratings should be your focus. See the full report for a list of these global names.
Global Sector Commentary
Key points from this report:
- Overall, trailing one-year performance is roughly equal across small, mid, and large caps.
- The Nasdaq/QQQ still hold a huge advantage over the trailing five years and are pushing forward in relative terms again over the past couple of weeks.
- With that, breadth has been narrowing again. The small-cap breakout has faded; it has a chance to hold, but has not been ideal over past two weeks.
- 0NY30/0ND30, or the percentage of stocks above their 30-week moving average, is not as strong as we would assume with indices at highs.
- Even on the stronger Nasdaq, just 47% of stocks are above the 30-week moving average. Divergence this week, as the percentage fell 11% but the Nasdaq made new highs.
- Not as many recent breakouts, and fewer are still actionable (not extended and not failing).
- See the full note for a list of three dozen of these names.
- Otherwise, the more narrow group of Technology/Consumer ideas is acting very well, although mostly extended.
Energy Absolute
Key points from this report:
- Shares of Energy Absolute (ENAP.TH; EA TB) were added to our Emerging Markets Focus List in late August as they emerged on the right side of the base. While they continued the long consolidation, shares are fully emerging out of a 39-week cup-with-handle pattern, moving back near all-time highs with just 2% remaining overhead (2018 and 2021 prior peaks). We now reiterate our buy recommendation. The pivot range is THB 68.5-72, while the last bit of resistance is THB 71.75 (weekly and monthly charts below).
- From solar/wind production to lithium-ion battery manufacturing, EA is now manufacturing electric vehicles utilizing its own batteries. It will start with ferries, buses, and taxis.
- Q3 sales and EPS were up 36% and 43%, y/y, respectively. In Q3, revenues from the new segment grew more than 700% (up to 11% of total sales) as it delivered 77 electric buses. The new bus manufacturing facility will be ready for production in Q4. Steady power segment results (86% of gross profit total), with sales/gross profits up 12% and 16%, y/y, respectively.
Global Sector Commentary
Key points from this report:
- As small caps, banks, alternative energy, and other areas that led in late 2020 and early 2021 have resumed RS gains, areas thathave not (avoid until they emerge from ranges):
- The U.S. IPO ETF (IPO): Does not mean recent IPOs are weak, but this one is weighted more toward those of past two to three years, not as many from this year.
- Stocks hurting performance include WISH, AI, PTON, STNE, ZM, GH, PINS, BYND, FVRR, PLTR, and more recently MRNA.
- Solid names within this group are UPST, ASAN, NET, BILL, DDOG, DT, ABNB, and CRWD.
- ARK Innovation (ARKK): Some overlap with IPO ETF. Has 27% overhead, needs to break above base midpoint
- Weak names are PLTR, TWTR, DKNG, ZM, ROKU, CRSP, NTDOY, Z, NTVA, and PRLB.
- Just a few solid like TSLA, COIN, U, and SHOP.
- The U.S. IPO ETF (IPO): Does not mean recent IPOs are weak, but this one is weighted more toward those of past two to three years, not as many from this year.
O’Neil Energy/Material Weekly
MP Materials Corp (MP) – $6.9B market cap – Technicals: The stock broke out of a 14-week cup base and is trading in
the pivot range. Composite Rating of 91, and SMR Rating of A. EPS Rank of 61 is expected to improve on strong EPS
growth estimates for FY21. Technical profile also looks good with RS line rising after a few months off highs. It has strong
RS Rating of 94 and A/D Rating of B-. Institutional sponsorship increased more than six times y/y to 290 as of
Global Sector Commentary
Key points from this report:
- Big small-cap breakout to join large/mid-caps already at highs. Russell 2000 value and growth both through key resistance after about eight months of consolidation.
- Earnings season very strong thus far.
- 14% median sales and 19% median EPS growth for the ~60% that have reported.
- 8% median EPS beat, and beats across all sectors except Energy. Consumer and Tech very strong beats.
- Average gain post-earnings results also good at +3% (from day prior to earnings through this Friday).
- Transports and Consumer (cyclical/retail) have the best performance, up 4-6% on average.
- Lots of volatility around earnings, however, with 9% standard deviation across all stocks.
- One-fifth are up or down at least 10% just this week.
O’Neil Energy/Material Weekly
Diamondback Energy (FANG) – $21B market cap – Technicals: The stock is slightly extended from the recent pivot and from its key moving averages. It has strong fundamental and technical ratings like SMR Rating of A, EPS Rank of 96, RS Rating of 97, and A/D Rating of A. Look for secondary entry on a low volume pullback to its 21-DMA (currently at $110).
Element Solutions
Key points from this report:
- We are reiterating our buy call on ESI as the stock is breaking out of a 21-week consolidation and to its highest level since June 2015 this week. Shares rose slightly after a positive earnings report, before breaking above June and August peaks on very strong accumulation over the past two days. The pivot range is $24.7-26.0.
- Adding to the strength in the breakout in ESI is a clear break to highs in the small-cap Russell 2000 Index this week. It joins the Russell Midcap Index, which broke to highs two weeks ago. Element has been a strong outperformer versus both (as well as Midcap Value which it is a constituent of) for the past five years, with acceleration since Q4 2020 (see comparison graph).
- It also screens well versus its peers Atotech (ATC) and DuPont de Nemours (DD), with an EPS Rank of 94 and Composite Rating of 98.
- Drivers include 5G rollout, EV growth, and a recent complementary acquisition in the surface finishing segment.
Global Sector Commentary
Key points from this report:
- Over the trailing five years, the S&P 500 is up 120% and the Nasdaq is up 206%.
- Just 36% of more than 2,100 stocks (with a full five years of trading) have outperformed the S&P 500.
- 21% have outperformed the Nasdaq.
- First decile of winners are outperformers.
