Tag: Rally Attempt

Market View

Posted on by Raj Gupta

The U.S. market has been moved to a Rally Attempt. Indices are consolidating after Wednesday’s big move

( ~5% ) off lows followed by Thursday’s bullish reversal. We could upgrade the U.S market to a Confirmed Up-
trend as early as Monday should a new follow-through day occur. Currently, the inventory of high quality stocks

with risk optimal entry points is low given the severe technical damage that occurred prior to this week. If a new
follow-through day occurs, we want to see more leadership ideas emerging from constructive consolidations as

risk-on sectors/groups move above price- or moving-average resistance. We recommend waiting for a new fol-
low-through day before increasing risk.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 24 ideas gained 3% on average this week, outperforming the S&P 500 (2.8%) but underperforming
the Nasdaq ( 4.0% ).
Actionable Focus List ideas: Ciena ( CIEN ), Dr. Reddy’s Labs ( RDY ), Fabrinet ( FN ), Xilinx ( XLNX )
By Sector

Along with the strong bounce off lows across the major indices, U.S Focus List performance was driven by Tech-
nology, Retail, Health Care, and Financial. In Technology, CIEN and FN regained their 50-DMA, while VEEV

and XLNX bounced off lows and are just below this key moving average. In Retail, WING is forming the right
side of a base after bouncing off its 200-DMA. Four Health Care ideas jumped 3.8% on average, led by ILMN,
but all continue to consolidate in a base. Financial ideas also remain in consolidation after a strong recovery off
lows this week, but PYPL is exhibiting constructive price action as it forms the right side of base, with a potential
aggressive entry at ~$90.

European Focus Long

Posted on by Midhun Parameswaran

On Thursday, the Stoxx 600 closed 0.011% above last Friday’s close. This week, we changed 16 markets, including the U.K., to a Rally Attempt. The U.K. market stayed above its previous low for three consecutive days, while the others continued to trade above Monday’s low when most markets saw a distribution day. Portugal’s market status has not changed and it remains the only market in a Downtrend

China A Shares Long

Posted on by Midhun Parameswaran

Te CSI 300 rose 0.28% for the week on slightly increased volume, still in an Uptrend Under Pressure with fve distribution days. Te A-share market was very volatile this week. Driven by news that Presidents Xi and Trump reached an agreement on the tariff issue at the G20 meeting, the index rose almost 3% on heavy volume and broke above its 50-DMA Monday. However, it couldn’t hold up and fell below resistance again, dragged down by news of the arrest of Huawei’s CFO. Fears of a China-U.S. trade war were stoked again. Our conviction remains low but will increase if the index can break above its November high of 3,294. Te next level of support would be ~3,126. We recommend staying cautious and keeping a watchful eye on stocks constructively building the right side of bases.

European Focus Long

Posted on by Midhun Parameswaran

On Thursday, the Stoxx 600 closed 1.27% (at 358.48) above last Friday’s price. All major European markets reversed Wednesday’s trend and closed in the green. This was mainly due to U.K. banks passing the Bank of England’s Brexit stress test. The slight positive sentiment for the week is attributable to the U.K. and Europe striking a deal on Brexit and the Italian government’s consideration of a lower budget deficit of 2% (down from 2.4%).

Market View

Posted on by Raj Gupta

The U.S. market is in a Rally Attempt. The S&P 500 and Nasdaq have now held above the October 29 intraday

low (S&P 500: 2,603; Nasdaq: 6,922) for four sessions. We are now looking for a follow-through day ( FTD ) be-
fore shifting the market into a Confirmed Uptrend. Currently, both indices are hitting resistance just under their

respective 200-DMA. Should the indices clear above that level next week, the next level of resistance will be the
50-DMA, which is ~5% above current levels. Overall, we still believe it is too early to increase risk in the market,
given that the majority of ideas are still repairing themselves technically. Just 12 (~29%) of 41 U.S. Focus List
ideas are trading above their respective 50-DMA, while only 114 stocks within the S&P 500 are trading above
that level. If we get a FTD, our recommendation will be to gradually increase risk, committing capital to only

high relative strength ideas that have recovered the quickest and have reached risk optimal entry points. We be-
lieve the market will provide additional opportunities to buy growth ideas as it progresses higher and through

the multiple levels of resistance that still remain. Remain patient for now, but be ready to buy a few actionable
U.S. Focus List ideas when and if we get that FTD.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 41 ideas gained 3.9% on average this week, outperforming the S&P 500 ( +2.4% ) and the Nasdaq
( +2.6% ).
Actionable Focus List Ideas: Chefs’ Warehouse ( CHEF ), Healthequity ( HQY ), Procter & Gamble ( PG ), Quantenna
Communications ( QTNA ), Xilinx ( XLNX ), Zoetis ( ZTS )
USFL ideas weekly earnings line-up:
Monday: Close: CDEV
Tuesday: Close: MTCH, PLNT
Wednesday: Close: SQ
Thursday: Open: WP
By Sector
Technology recovered this week, with multiple ideas rebounding from oversold levels. Despite the rally, most
ideas are still consolidating and have yet to reach ideal pivot points. XLNX is the strongest, breaking out into new
highs, while QTNA regained its 50-DMA and is actionable as an early aggressive entry. VEEV and INTU found
support at their respective 200-DMA and are still basing overall. Capital Equipment ideas also recovered, with
ROLL breaking into new highs post earnings and HQY now constructively forming the right side of a new base.

European Focus Long

Posted on by Midhun Parameswaran

On Thursday, the Stoxx 600 closed 3.04% above last Friday’s price. Market sentiment around the world seemed to be improving; Europe took the news of Angela Merkel’s departure from Germany’s leadership in stride. This week, we changed France, Germany, the U.K., Sweden, Spain, Portugal, Belgium, the Netherlands, Ireland, Finland, and Italy to a Rally Attempt from a Downtrend.We moved Norway and Austria to a confirmed uptrend after a afollow-through day. We moved the Stoxx 600 to a Rally Attempt from a Downtrend after it remained above day one’s low. Of the 17 indices we cover, fourteen are in Rally Attempt and two are in a Confirmed Uptrend. Luxembourg remains in a Downtrend.

China A Shares Long

Posted on by Midhun Parameswaran

The CSI 300 rose 1.2% for the week on increased volume and the market is currently in a Rally Attempt. Last weekend, the Chinese government released a series of positive signals to relieve downward pressure on the markets as well as investors’ panic. As a result, the CSI 300 gapped up and surged 4.3% on Monday, with the financial sector leading. However, the index tested but failed to break above its 50-DMA, still trading 17% below its 200-DMA and 3% below its 50-DMA, consistent levels of resistance. Our conviction remains low, as leading stocks with strong fundamentals were selling off heavily. Moreover, the RMB has been depreciating against the dollar, with fears that it may continue to fall below 7. In these poor market conditions, we recommend continuing to be defensive.