Trading Plan: 3 February 2022
Is this then the end of the relief rally? Nasdaq (+0.5%) tried to reach for the SMA200, but it only succeeded to close above the EMA21. Even if the net highs are bigger than the net lows, I am very skeptical about the advance. The volume is not there, is more or less flat during the previous days' rally.
SP-500 (+0.94%) looks better, but the divergence between rally and decreasing volumes is screaming. It might hit the SMA50, but not with volume, so I wouldn’t bet on the uptrend. The energy ($FANG, $MTDR), shipping ($ZIM) and fertilizer ($MOS) sectors are still good, but I just wanted to see broader participation, so let’s just be cautious during this time. Cash is better now.
Facebook (-22%!) reported earnings and… they’re not growing anymore. Revenue: $33.67 billion, +32% YoY (analysts expected $33.4 billion billion). Daily Active Users (DAUs): 1.929 billion (vs. 1.93 billion in Q3; analysts were looking for 1.95 billion in Q4). The company also missed on its Monthly Active User (MAU) metric. The street was looking for 2.95 billion users, they booked 2.91 billion.
PayPal plummeted 26% today after the company’s disappointing earnings and reports of slowed growth. PayPal lost $50 billion in market value as a result — its worst one-day performance ever.
Many other stocks went south: $SNAP(-20.86%), $SPOT (-15.58%), $PINS (-17.53%), $TWTR(-11.91%), etc.
Inflation is very high, the economy is slowing down rapidly this year and the Fed will start soon tightening. These are not the things we expect when bullish. I will keep an eye on the SaaS stocks as they have recurring revenues and they might swim easier during these times. Cash is king.
Sectors
Best yesterday sector: Communication Services, then Real Estate. Worst sector: Consumer Cyclical.
Best weekly sector: Communication Services, then Technology. Worst sector: Consumer Defensive.
Best monthly sector: Energy, then Financial. Worst sector: Consumer Cyclical.
Sentiment
NAAIM (weekly, neutral between 70 and 90): 53.39
VIX (neutral under 20): 22.09
Equity Put / Call Ratio (neutral between 0.7 and 1): 0.97
CNN Fear & Greed: 35 (Fear)
Breadth
Stocks above SMA40 (neutral between 30 and 80): 29.99%
Stocks above SMA200 (neutral above 30): 31.65%
Number of stocks that increased yesterday by more than 4%: 484
Number of stocks that decreased yesterday by more than 4%: 65
Noteworthy Earnings Reports / Events for today
Ford Motor ($F) will report its fourth-quarter earnings after Thursday’s close. Analysts, on average, expect earnings to surge 32.4% YoY to 45 cents per share. Revenues are projected to rise to $35.5 billion, a more modest 6.9% improvement over the year-ago figure.
Other earnings reports:
What to trade today
The music has stopped for the growth stocks and many connected stocks reversed the trend along with them. I closed them all yesterday in the morning to keep the profits. Never let a win go to your head or a loss to your heart. Normally, I would have let them more room, but I felt they have no power to sustain the high levels. Energy ($CVX) and Financial ($MA) are still in the game, but stops are tightened.
I noticed Everspin Technologies ($MRAM) for a few weeks, when the market will be more stable, there are many chances to see a rocket here.
I will watch the hard-hit stocks from after-hours. I expect a small bounce after the opening (investors might rush in buying the dips) and then short them under the lows.
Do your due diligence if or when placing a trade. All ideas stated here are my own and do not represent trading or investment advice.