Adnoc Drilling Company (AD1.AE) – $20B market cap – Technicals: The stock is trading in the pivot range of AED 4.51–4.74 after
breaking out of a stage-one cup-with-handle base. Fundamental profile: EPS Rank 89 and Composite Rating of 98. Best possible
SMR Rating of A, driven by expanding margins and improving ROE and sales.. Double-digit earnings growth estimates for FY24 and
FY25. Strong earnings stability with three- and five-year stability factors below 10.
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.
O’Neil Energy/Material Weekly
Nextera Energy (NEE) – $159B market cap – Technicals: The stock is forming the right side of a stage-one flat base, with the pivot
3% away, on the daily chart. On the weekly chart, it is forming a multi-year consolidation base and trading 18% off its pivot. RS line is
in an uptrend, with a strong RS Rating of 90. Mixed technical profile: Acc/Dist Rating of C+ and Up/Down Volume ratio 1.3. Strong
fundamental profile: EPS Rank 85 and SMR Rating of B.
Global Sector Strategy
In terms of intermediate rallies and corrections, here are the averages on the Dow within both bull and bear markets, going all the way back to 1900. Both average/median up and down legs have been more tame than historically. The Dow has not yet had a >10% pullback in one leg instead seven pullbacks of 5–9%. Of course, the Nasdaq has been more volatile, with two pullbacks of >10%, including the current correction.
O’Neil Energy/Material Weekly
GTT (GTT.FR) – $5B market cap – Technical: The stock bounced off its 50- and 200-DMA and retook its 100-DMA on above average volume. It is forming the right side of a stage-two 22-week consolidation base, with the pivot 10% away. It should turn constructive on clearing resistance along €138.20 (+1%) and €143 (+5%). RS line is in an uptrend, with a good RS Rating of 68 and a three-month RS Rating of 86. Other technical ratings are also improving, with an Acc/Dist Rating of B- and Up/Down Volume ratio of 0.9. Strong fundamental profile: EPS Rank 90 and SMR Rating of A.
Global Sector Strategy
Markets certainly attempt to price in any interest rate changes, and so we know the relationship of rate changes to market moves is not exact in terms of the timing. But for this exercise, we will just give a look at the history of how the S&P 500 performed as rates (Discount Rate) were actually being lowered. We used a minimum of two rate decreases within a one-year time frame for the periods to qualify. Since 1950, there have been 13 such periods, charted below with the S&P 500 price history overlayed. Red arrows denote the beginning of multiple rate decreases.
O’Neil Energy/Material Weekly
Diamondback Energy (FANG) – $38B market cap – Technical: The stock is forming the right side of a stage-two 13-week cup base
and is trading right below its pivot @$211.96. RS line is recovering, with a strong RS Rating of 84. Acc/Dist Rating of B has improved
over the past three weeks, with an Up/Down Volume ratio of 0.8.
Global Sector Strategy
Key Points:
- Substantial weekly reversion as laggard indices/styles sharply outperformed following lower-than-expected CPI #s and rising interest rate cut expectations for September.
- Equal-weight S&P 500 outperformed the S&P 500 by ~200bps, while smallcap Russell 2000 led by ~500bps.
- Nasdaq 100 and other more concentrated indices (SPYG, FBCG) lagged the S&P 500 by over 100bps.
- Breakout #s rose sharply for the first spike in about eight weeks.
- Ex-financials (ETFs), the weekly # equaled a year-to-date high last generated in March.
July 11, 2024 – U.S. Market Overview
O’Neil Energy/Material Weekly
Sal Saudi Logistics Service (SSL.SA) – $6.6B market cap – Technicals: The stock broke out of a stage-one consolidation base. Accumulate within the actionable range of SAR 300–315. Fundamental profile: Moderate EPS Rank of 67 is expected to improve based on strong forward earnings estimates. Composite Rating of 98 and the best possible SMR Rating of A.
Global Sector Strategy
We have tended to look at relative sector relationships on a trailing 12-mo basis as the max out/underperformance is typically between +40% to -40% for most sectors versus the S&P 500. But we know the move in artificial intelligence stocks began to pick up relative strength at the beginning of 2023 and has coincided with indices becoming more and more concentrated. Here are all 11 O’Neil sectors over that period as well as the S&P 500. Technology has more than doubled, while the average of the other 10 sectors is +15%.
