Fiserv: Channel Your Energy 🪫🔋Fiserv is making use of our pink trend channel, where it has last finished wave (D) in magenta. Already, the share is on its way downwards to develop wave (E) in magenta as well as wave E in green, which should end at the channel’s lower edge. This low should then provide enough energy to lift the course above the resistance at $127.34. A 33% chance remains, though, that Fiserv could slip below the support at $87.03, thus triggering further descent. In that case, the share should expand wave alt.II in gray into the gray zone between $62.53 and $26.76 before moving upwards again.
Techstocks
Financials Gain With Tech In PainWhen central banks raise rates, financial sector outperforms. That is until credit crumbles by which time all bets are off.
As federal funds rates spike and stay elevated for longer, lending rates will climb higher relative to deposit rates. Net Interest Margin ("NIM") which is the difference between lending and borrowing rates continues to favour financial services firms.
Inflation while softening remains high in developed and emerging markets. Hopes of Fed pivot on rates is fading as inflation is starting to spike again in some countries. Central banks on either side of the Atlantic are determined to tame it down.
Continued rate hikes push economies into recession, crush consumer demand while increasing credit (corporate & personal) defaults. At that stage, even the financial industry (“financials”) starts to feel the pinch. But growth and tech stocks will be hurt even more. These stocks will plummet as present values of future distant profits get discounted at higher rates.
As financials gain from attractive NIMs, growth stocks meanwhile are likely to get hammered from elevated rates. This case study articulates a spread trade to harness yields from these anticipated market moves.
Investors with portfolio exposure to S&P Financial Select Sector Index ("Financials Index") can participate in industry's outperformance. This index provides exposure to banks, mortgage firms, consumer financial firms, capital markets and insurance firms, among others.
A long position in CME E-Mini Financial Select Sector Futures and a short position in CME Micro E-Mini Nasdaq-100 Index Futures will deliver >2.7x reward to risk ratio.
HISTORICAL NEXUS BETWEEN TECH-HEAVY NASDAQ & FINANCIALS INDEX
Over the last 10 years, the ratio of the Financials Index relative to Nasdaq-100 touched a high of 0.0917 in July 2013 and a low of 0.0342 in November 2020. The ratio rises when financials outperform Nasdaq.
The ratio hovered around 0.072 on average from 2013 until the onset of pandemic linked monetary stimulus. It plunged when the monetary policy taps were let loose. Valuations of tech, high-growth, non-profitable firms soared relative to staid financials.
However, with QE substituted by QT i.e., from monetary easing to tightening, financials are set to fight back.
Frail demand with layoffs is the uncertain path ahead for tech. In contrast, financials appear poised with resilient balance sheets to swing the ratio back in its favour.
DEMYSTIFYING S&P FINANCIAL SELECT SECTOR INDEX
The Financials Index is market cap weighted and rebalanced quarterly. As of end February 2023, there were sixty-seven companies in total with the top-10 representing 53% of the index. Top-10 index constituents by weight and their 12-month price targets are summarised below.
Price targets (PT) for the top-10 point to an average appreciation of 12%. The average of maximum PT among the top-10 delivers a spectacular gain of 29%. However, the average of minimum PT among the same group shows a drop of 8%. Clearly analyst targets are skewed towards a healthy upside gain with limited downside risk.
FEDERAL FUNDS RATE TO STAY HIGHER FOR LONGER
In speaking to Barron’s, Brian Moynihan, CEO of Bank of America said that the Fed is going to have to leave the rates at a higher structure than people may believe. The Fed were late to the game, and they have got to keep rates high for long until it works through the system.
ELEVATED RATES HURTING DEMAND BUT INVESTORS REMAIN EERILY BULLISH
Tech sector is feeling the heat of melting demand. Revenues of S&P 500 tech firms is expected to grow only 2% this year. It is the slowest since 2016 as per Bloomberg Intelligence.
Q4 earnings have been sending worrying signals for the largest tech companies. Earnings from Apple, Microsoft, Alphabet, Amazon & Meta missed estimates by 8% on average, as per Bank of America.
Despite cracks in Q4 earnings, investors’ enthusiasm for tech stocks remains bubbly. Nasdaq is up 13% this year.
Rising share prices coupled with shrinking earnings estimates is pushing Nasdaq valuations into lofty zone. The Nasdaq is now priced at 24-times one-year forward earnings, compared to an average of 20-times over the last decade. Overpriced by 20% based on historical standards.
In contrast, financials price-earnings ratios, as represented by Financial Select Sector SPDR ETF is at a humble14.5-times. Every dollar of earnings per year requires $14.5 in financials compared to $24 in Nasdaq. In theory, the Nasdaq is 66% more expensive than financials.
Bullish markets this year has pushed Nasdaq stocks well ahead of price targets. This phenomenon might be the result of a bear market rally or short covering or rising retail participation or all of them. Consequently, ratio of financials to Nasdaq has slumped 9% so far this year setting the scene for an attractive spread trade entry.
TRADE SET UP
As central banks are determined to keep inflation down by keeping rates higher for longer, this paper demonstrates a long position in CME E-Mini Financial Select Sector Futures expiring in June 2023 (“financial futures”) and a short position in CME Micro E-Mini Nasdaq-100 Index Futures expiring in June 2023 (“Micro Nasdaq”) will deliver >2.7x reward to risk ratio.
Spreads require that the notional values of each leg of the trade to be identical. Each financial futures provides an exposure to $250 x S&P Financial Select Sector Index. Meanwhile, each Micro Nasdaq provides an exposure of $2 x Nasdaq-100 Index.
As of March 3rd, financial futures expiring in June 2023 settled at 446.4 while the Micro Nasdaq settled at 12,446.50.
Balancing each leg of the trade requires 2-lots of financial futures (2 lots x $250 x 446.4 = $223,200) and 9-lots of Micro Nasdaq (9 lots x $2 x 12,446.50 = $224,037).
Entry: 0.0359 (446.4/12,446.5)
Target: 0.0405
Stop: 0.0342
Profit at Target: $ 28,800
Loss at Stop: $10,350
Reward-to-Risk Ratio: >2.7x
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
NASDAQ Bounce - how high??Someone gave me a heads up earlier this week that ChatGPT returned an answer to say that the market will tank on 15 March 2023. While I see it a little more different, I still keep an open mind as a lot can happen in a week (as we know in recent years).
So first up, ChatGPT is an amazing quantum leap and it is one of those triggers that form a tangent in our development time line. To me, broadly this is like when Google met Siri/Alexa. That said, perhaps the 15 March is a collation of expectations.
Nonetheless, looking into the technical picture for the NASDAQ futures, NQ1!, gives a technical collation of the happenings in the past weeks. Previously, a retracement target was marked out on the weekly chart (faded yellow ellipse). Since then, the NASDAQ made a lower high, and pulled back to the 50% Fibonaccie retracement level and support level about 11,800. And Friday clearly broke out of trend.
So, now how?
First, we look at the green and red dotted lines. These are the TDST levels that need to be broken to have a trend in force. According to the current TD Sequential, the NASDAQ is still in a bullish trend, and just finished a Buy Setup on Thursday, hence a clockwork bounce thereafter expected (and happened).
Next, looking at the range support resistances, we see the green and red rectangles. Breaking out or down with a decisive close and technical alignment (MACD and VolDiv) confirms the trend.
Taking into account the MACD and VolDiv, both are retracing, but are not yet bearish. So taken together, we can expect a bounce, which probably just started. Watching the strength of the bounce is critical, and the first check in point is about 12,500. A trend line connecting the last two highs also point to an approximate area at 12,500 (yellow ellipse). Noted, the MACD is weakening, and so is the shorter term VolDiv. So not yet crazy bullish.
Overall, expecting a lower high (at this point). And going back to the "15 March", although long range analysis not shown here, it appears that May to Oct is a deeper down time. Will update on this in time...
WILL META STOCK CONTINUE TO RISE?Looking at the position of this asset, I will say that if the TL is strong enough to hold as support, then I will target $200 as my first buy TP.
Note: $200 zone is also the FIB38.2 zone making it a significant area to watch out for.
However, if the Trendline fails, we may be heading downwards $150 to fill the gap.
I hope fundamental favours META
SHARE YOUR OPINION, LIKE AND FOLLOW
Snowflake: Snowed Under ❄️Snowflake seems to be snowed under with work. The share has a great deal to do, but is currently delaying the anticipated ascent, gradually sagging towards the support at $110.27. There is a 33% chance that the course might drop below this mark, thus developing wave alt.2 in turquoise earlier already. However, we primarily expect it to climb above the resistance at $205.66 first to lodge the top of wave x in magenta before moving downwards again. Wave 2 in turquoise should then return Snowflake below $205.66 and carry it below the support at $110.27, introducing fresh upwards movement afterward.
Electronic Arts: Pushing the Right Buttons 🎮Electronic Arts has been pushing the right buttons and has made fine use of our pink trend channel, finishing waves (a) till (e) in violet. Indeed, the course has already made further progress, touching at the support at $109.27. Next, the share should gain even more downwards momentum and drop below this mark to complete wave B in turquoise. Afterwards, we expect Electronic Arts to climb above the resistance at $150.30 to conclude wave C in turquoise as well as wave (B) in red. Subsequently, the course should start a long journey to the south, falling back below $150.30 and below the supports at $109.27 and at $73.91. There, it should enter the green zone between $64.44 and $40.83 to finish wave 2 in green before turning upwards again.
Block: Playing Tag 🙃“You’re it!” Block calls, tapping on the magenta-colored zone and taking off. The share seems to be playing tag and has just caught the magenta-colored zone, finishing wave ii in magenta with one impulsive downwards spike. Next, the course should seek shelter above the resistance at $94.87, thus gaining further upwards momentum. However, there is a 32% chance for Block to lose its drive and to drop below the support at $69.16. In that case, the course should develop wave alt.ii in magenta first before heading southwards, abiding above the support at $51.16 along the way.
Intuit: Trust Your Gut 😊After it had started the ongoing descent so confidently at first, Intuit has been struggling in a sidewards movement. Now, the share should trust its gut and decide or rather intuit – pardon the pun! – to continue its journey to the south. We expect the course to drop below the support at $339.36, where it should complete wave B in green at about $303.29 before taking off again. Alternatively, Intuit could have already finished wave alt.B in green and thus climb above the resistance at $457.94 by now. We rate this alternative scenario with a probability of 38%.
TSLA BULLISH PIERCING CANDLESTICK With the recent release of teslas quarterly reports that we’re better than expected we saw a push to test 180.00 with a slight pullback, depending on feds decision we can see push higher to 300.00. With more manufacturing and infrastructure updates in the upcoming months if positive these could help push price back to retest precious highs.
AMZN BULLISH ENGULFING CANDLE Monthly candle just closed and it looks very much like a bullish engulfing candle, reports will be released Thursday with expected volatility, I see this pushing price higher up to 135.00 -140.00
NDQIf S/R flip 12,170-12,200 then we should head turbo back to ATH 16,800. Could be in the most hated melt up the stock market ever seen.
NFLX - Potential Short Setup Here we are looking at NFLX on the Daily TF…
As you can see, Netflix has broken down from its previous macro support (blue), and retraced back to the scene of the crime. Currently, it is re-testing this very same previous support as newfound resistance.
While I can’t suggest how YOU should trade it, this certainly appears to me as a VERY strong short set up (not financial advice).
We will continue to monitor this chart and see how it reacts to this level. Stay tuned to make sure you don’t miss any timely updates…
What do you think will happen? Let us know in the comments!
Cheers!
NVIDIA 40% OpportunityClear reverse head and shoulder opportunity for NVDA. Neckline is broken. Expect 38%-40% rise. Good Luck.
NASDAQ bottomed or fall 20% by March?Here is my chart combining channels, trend lines, and waves.
You can see that the NASDAQ has been fighting to stay inside the blue channel since mid-October, but has been trapped under the black channel. If it is going to hold, then this would be a good place. That would keep the blue channel bull rally intact.
However, this week's rejection off the top of the channel is not a great sign. There is still a good possibility that we still need to complete the wave C of the larger ABC correction before this is over. Right now, Wave C stands at a 0.618 fib extension of Wave A which is pretty small. If it goes lower, then a bounce and support at 0.786 seems logical, which is around the peak before the COVID crash. That could be a good long entry.
I would not rule out something closer to the 1.0 level before we are done. If that does come to be, then that takes us down to the red trend line created off the bottoms of the 2018 and 2020 corrections. That is the 9000 range (could overshoot down to 8700) and would be a great place for a big long entry. Anything lower than that, and, well, lets not think about.
AAPL Testing Crucial ZoneHere we are looking at AAPL on the Daily TF…
In this chart, AAPL is testing a crucial zone as resistance, which acted as previous macro support dating back to September of 2020.
As you can see, there is also a downwards sloping resistance forming as well, which it’s testing as well.
In testing its previous macro support as newfound resistance (red) and local resistance (light blue) simultaneously, we can conclude that this test for AAPL is crucial in determining what comes next…
I will continue to develop this test of resistance as the chart develops, and update the idea once it breaks in either direction!
What do you think will happen?
Cheers!
Another come back?I would open a small long position and wait for the break out. If the price closes above the $115 resistance by the end of the week I'll add the next trade day session.
Technical Analysis of Google (NASDAQ:GOOG)Hello guys,
I am sharing with you my analysis of Google.
I think the stock looks pretty cheap at the moment and it is forming a beautiful Double Bottom.
This is further supported by a MACD Bullish cross and upward trending RSI, which is above the 50 line.
Overall I think it has an appealing risk-to-reward opportunity.
What do you think?
Signs before Tesla crashContent:
i. Early signs before its crash
ii. These signals are applicable to others markets
iii. How to hedge Tesla?
This method can be applied to any other markets. In segment 2, I demonstrated how you do that in the Nasdaq index. You can email me your case study on other markets with similar behaviour, we can check with each other.
E-Mini Nasdaq
Minimum fluctuation
0.25 points = $5
1 point = $20
10 points = $200
100 points = $2,000
1,000 points = $20,000
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Oracle: Sweet Temptation 🔥Oracle is moving dangerously close to the resistance line at $85.58, which would activate our alternative scenario. In that case, the stock would rise further into the green target zone between $85.45 and $92.50 to finish off the grey wave alt.I before sinking back into a correction. Primarily, we expect the course to drop into the green target zone between $72.66 and $63.46 to complete the grey wave II. After completion, we predict Oracle heading North in the longterm.
Google - Bullish Harmonic The tech stocks witnessed deep corrections of over 30% on Nasdaq.
Nasdaq was one of the most underperforming indices in US and the bearish momentum prolongs on the first day of 2023.
The Bullish Harmonic pattern on $Goog confirmed the reversal but today's dip seems an opportunity to go long.
The pattern negates on breach of $80.
Good time to buy TESLA historicallyTesla may have met the support that will be the last of its bear market. Based on the bounce so far on the 329-week SMA and that any price action at or below the 200-week SMA has historically been the best times to invest in TESLA, we can assert it's likely now is a decent time to buy TESLA.
$NDX can move 1500-2000 points lower. $QQQ down. 200ma failingAs company earnings decline and forward guidance becomes pessimistic, Nasdaq 100 has room to go back to 9000-8700. Big tech companies have already started reducing their workforce, and more layoffs may come next year. The 200ma offered support after the first leg down, but now it looks like it might give way. RSI and stochastic are bearish.
Now is a good time to let go of any grip your mind has on the "big tech" stocks of the past ten years and start your list of up and coming tech stocks for the next 10-15 years.
This post is not to create a scare. I am not shouting for a crash. As a 40+ adult who understands much more than the last five yrs of stock market rising - and the Covid QE slingshot - I am offering practical insight into what is possible.
Add JOBY to your watchlist.
#COIN - #COINBASE final low targeting the teens :(A measured percentage move indicates
a few more months of capitulatory action
As we saw earlier in the year
#crypto equities have been good leading indicator for #BTC and the crypto space
