Best Stocks, Crypto, and ETFs to Watch – Disney, Twitter, Bitcoin, Bonds in Focus

Dow component Walt Disney Co. (DIS) fell to a 15-month low in January, continuing a major downtrend that relinquished more than 36% of the stock’s value into January. Disney+ subscription growth has slowed rapidly while churn has increased, with many viewers disappointed by mediocre programming, especially in the Star Wars and Marvel ecosystems. Cruise ships and theme parks are struggling as well while theatrical releases have missed analyst projections. The company reports Q1 2022 earnings on Wednesday evening.

Twitter Inc. (TWTR) sold off with Meta Platforms Inc. (FB) last week, testing January’s 18-month low, but got a lift after upbeat reports from Amazon.com Inc. (AMZN) and Snap, Inc. (SNAP). Given the whipsaws, expectations are low ahead of Thursday’s pre-market report, when the company is expected to post a profit of $0.34 per-share. If met, earnings-per-share (EPS) is unlikely to generate much upside because would mark a lower profit than the same quarter last year.

iShares 20+ Year Treasury Bond ETF (TLT) fell to an 8-month low on Friday while 10- and 30-year bond yields shot up to multi-month highs. This price action could signal the next wave in an inflationary spiral that sends worldwide inflation much higher in coming months. U.S. growth stocks ignored the selloff during the mixed session but correlation between higher rates and lower equity prices could easily trigger another stock market decline.

Bitcoin (BTC) rallied to a two-week high on Friday, heading into the third test of 50-day moving average resistance since the cryptocurrency broke support at that level in November. Weekly relative strength indicators have flipped into buy cycles, raising odds it will mount this barrier and head into tougher resistance near 44,000. Despite the bounce, it isn’t wise to place aggressive long-side bets at this time because monthly readings are still firmly engaged in sell cycles.

Wynn Resorts LTD (WYNN) reports Q4 2021 earnings after Tuesday’s closing bell, with analysts looking for a loss of $1.25 per-share on just $995.28 million in revenue. If met, the loss-per-share will mark a 51% improvement compared to same quarter last year. Las Vegas operations are slowly returning to pre-pandemic levels but Macao continues to struggle, due to China restrictions. However, the government has just issued guidelines for license renewal that should ease pressure on the island’s major players.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Top 4 Things Traders Have to Know Today

What is happening with Meta, Paypal and Spotify?

Spotify didn’t actually issue annual guidance, which seems to have exacerbated worries about potential subscriber growth potential. All three were down by double-digits in after hours trading at one point last night.

Competition is clearly much more fierce as larger players are starting to dial it in and use the latest technology to gain better traction i.e. Visa, Mastercard, etc. I also read reports this week that Apple is diving deeper into the payment and banking space and will soon be able to offer all kinds of options via the smartphone.

In simple terms, I wonder if PayPal executives could see they had a “growth” problem and that’s why they took a look at Pinterest a few months back. I heard rumors yesterday perhaps they might be looking at Robinhood.

At the moment the stock market just doesn’t seem real forgiving to those who swing and miss. On a somewhat positive note, Facebook disclosed they purchased back +$20 billion of their own stock in the last quarter.

Bulls are hoping for solid results from Amazon and Snap today to help prevent sentiment in the tech sector from creating more fallout. I’m not holding my breath!

Data to watch

Results are also due from Activision Blizzard, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, SnapOn, Wynn Resorts, and Xylem.

On the economic data front, Factory Orders, the ISM Non-Manufacturing Index, and Productivity and Costs are due today. Productivity and Costs has become a more closely watched report as worries about climbing wages have grown. In the third quarter, productivity fell -5.2% (the most since 1960) and labor costs rose +9.6%.

Obviously, weakening productivity and rising costs is a bad combo for corporate profits so reversing this trend is a high priority. It may be tough to find much relief in the near-term with the labor market expected to remain extremely tight.

The shortage of workers has also been exacerbated by the latest Covid wave. ADP’s private payrolls report yesterday showed a decline of -301,000 jobs for January versus the estimate for a +200,000 gain, the first reported net job less since December 2020 according ADP.

Covid issue

Most analysts blame last month’s Covid surge for the decline and expect it is just temporary. The official January Employment Report on Friday is expected to show a gain of around +150,000 jobs, though the government has warned that the data won’t be reliable due to Covid-related reporting problems. Hopefully we’ll soon stop hearing that excuse as the Omicron Covid wave does seem to be burning itself out in the U.S. Case numbers across the country are about half of what they were in mid-January.

Hospitalizations have finally started to come down, too, which experts say is a more reliable measure. I hate to mention it but health officials are currently monitoring a mutated strain of Omicron known as “BA.2″… when does it end?

The standoff between Ukraine and Russia

Also still on the radar is the standoff between Russia and Ukraine. The U.S. is now readying to send more than +3,000 troops to bases in Eastern Europe as new satellite images appeared to show an even further increase in Russian troop buildup on Ukraine’s borders. Whether or not war is a realistic threat or not, the climbing tensions continue to stoke the flames in the energy markets.

Brent crude futures are trading near $90 as OPEC struggles to meet production targets and global physical supplies continue to tighten. The 19 OPEC+ countries with quotas underperformed their production targets by -832,000 b/d in December. Russia is currently the top OPEC+ producer, so any disruption to those supplies runs the risk of shooting oil prices even higher. Take note the front-end of the natural gas market is up over +50% in the first month of the new year. It’s certainly going to be a wild ride in 2022!

 

Brace Yourself For Another Wild Month In Stock Markets

For the year, the Dow is down -6%, the S&P 500 is down just over -9%, and the Nasdaq has lost -14.7%. The previous record-holder is January 2009, an ugly moment for the economy, when the stock market fell -8.6%. In addition, the VIX – aka the CBOE Volatility Index – has actually dropped back to around 31 after topping 37 earlier this week, its highest point since November 2020.

Keep in mind, the index isn’t registering anywhere close to levels reached during other periods of “extreme” volatility. For example, the index, which is measured between zero and 100, hit its highest point of almost 83 during the financial crisis in 2008. Its most extreme point during the pandemic was around 66 in March 2020. So, by comparison, this week’s volatility has been rather mild.

Federal Reserve

Some insiders equate the wild swings in stock prices to investors, particularly “big money,” trying to establish a new baseline for stock valuations minus the Fed’s easy money policies that have driven a massive amount of cash into markets since the pandemic began in 2020.

At its height, the Fed was pumping as much as +$120 billion per month into the system via its asset purchase program, ballooning its balance sheet to now nearly $9 trillion.

At the same time, the Fed has held its benchmark rate at near-zero and, before that, hadn’t even attempted to raise rates since 2018, and then only briefly. The last full-cycle of rate hikes was 2015. What’s more, investors haven’t really had to factor for inflation since the early 90s and it hasn’t been this high since the 80s.

Bottom line, whatever the new “normal” ends up looking like, it will be dramatically different from the pre-pandemic investing landscape. I’ve heard several large stock traders saying it seems to be the return of Alpha instead of the race to levered Beta. I hear others on Wall Street referencing it to a bit of league recreational youth baseball team where everybody now gets an award simply for participation, but then kids run into a rude awakening when performance really starts to matter.

It feels like we are there in the stock market; every business that was coming into the market was simply being rewarded with participation points, now people are starting to keep a real scorebook and counting the strikeouts and runs scored.

Economy still roars

The good news is that the U.S. economy continues to roar. Historically, a combination of moderate inflation and moderate interest rates has led to some of the biggest boom times for U.S. Last week, the Commerce Department said Q4 Gross Domestic Product (GDP) grew at an annualized rate of +6.9%, stronger than Q3’s +2.3% and well above Wall Street expectations of around +5.7% growth.

Consumer spending climbed at a +3.3% annual pace led by a +4.7% increase in services spending. But the real stand out was private investment which rocketed +32% higher, boosted by a surge in business inventories as companies stocked up to meet higher customer demand. Rising inventories, in fact, contributed nearly +5% to Q4 GDP growth.

On the one hand, the inventory build is positive because it indicates an easing of supply chain dislocations that should in turn help with inflation pressures. On the other hand, many economists note that the big boost from retailer and wholesaler restocking is not likely to be repeated.

Companies will also likely start to unwind at least some of that inventory in the quarters ahead, which could drag overall 2022 GDP, especially if consumer spending also drops off. And investors are more closely tracking consumer behavior as inflation continues to rise.

With consumer spending accounting for about 70% of the U.S. economy, any signs that belts are tightening or moods are getting overly pessimistic will likely set off some alarm bells.

Data to watch

Turning to next week, it will be another busy one for both key economic data as well as earnings. The main economic data highlight will be the January Employment Situation on Friday. Other key data includes ISM Manufacturing, Construction Spending, and the JOLTS report on Tuesday; ADP’s private payrolls report on Wednesday; Productivity & Costs, Factory Orders, and the ISM Non-Manufacturing Index on Thursday.

Earnings wise, results are due from NXP Semiconductor and Trane on Monday; Advanced Micro Devices, Alphabet, Amgen, Chubb, Electronic Arts, Exxon, General Motors, Gilead Sciences, Match Group, PayPal, Sirius XM, Starbucks, and UPS on Tuesday; AbbVie, Aflac, Allstate, Boston Scientific, CNH, Corteva, D.R. Horton, Ferrari, Humana, Johnson Controls, Meta (Facebook), MetLife, Novartis, Novo Nordisk, Qualcomm, Siemens, Thermo Fisher, TMobile, and Waste Management on Wednesday; Activision Blizzard, Amazon, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, Snap, SnapOn, Wynn Resorts, and Xylem on Thursday; and BristolMyersSquibb, CBOE, Phillips 66, Regeneron, and Sanofi on Friday.

Bottom line, brace for another huge week of extreme volatility.

Wynn Resorts Accumulation Hits All-Time Low

Wynn Resorts Ltd. (WYNN) fell 25% in 2021, adding to a two-year cumulative loss of 61%. Las Vegas casino revenue improved substantially last year despite new variants, but China’s zero COVID policy and draconian Macao restrictions kept away high rollers and VIP junkets, yielding the two worst years since 2006. Improvement is likely in 2022 but investors should lower their enthusiasm, with Morgan Stanley now projecting $15 billion in gaming revenue, far lower than the $36.4 billion booked in 2019.

China’s Long Shadow

The Nevada Gaming Board just reported that November revenue rose 71.4% year-over-year in November to $1.13 billion, with the Las Vegas Strip surging 115.9% compared to 2020’s empty casinos. Macao, which has no monthly lag, reported a modest 1.8% December improvement, highlighting continued political and biological headwinds. However, China took a giant step toward normalcy last week, announcing reforms for casino licenses, which are expiring this year.

“The Legal System of Casino Lucky Gaming Operations” proposes 9 changes intended to increase central control: (1) the number of grants for operating casino lucky betting, (2) the grant period, (3) increase statutory requirements for the supervision of approved cos., (4) employee protection, (5) strengthen the review mechanism for approved cos., gaming intermediaries and partners, (6) introduce government representatives, (7) promote projects with non-gaming elements, (8) social responsibility, (9) clarify criminal liability and administrative punishment”.

Wall Street and Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’ rating, based upon 4 ‘Buy’, 5 ‘Hold’ and no ‘Sell’ recommendations. Price targets currently range from a low of $91 to a Street-high $131 while the stock is set to open the first session of 2022 nearly $6 below the low target. This placement reveals a major disconnect with Main Street investors, who have done a far better job evaluating major roadblocks put into place by Chinese bureaucrats in the last two years.

Wynn Resorts hit an all-time high near 250 in 2014 and entered a major downtrend that found support near 50 in 2016. Subsequent bounces posted lower highs in 2018, and 2020 while the stock plunged to an 11-year low in March 2020. The rally into March 2021 yielded another lower high while price action into 2022 is holding the .618 Fibonacci selloff retracement level in the mid-80s. Accumulation has dropped to an all-time low but the January Effect should kick into gear soon, yielding a bounce that could reach 100.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

 

Best Stocks, Crypto, and ETFs to Watch This Week – Disney, Boeing, Shiba Inu and IWM ETF In Focus

Walt Disney Co. (DIS)

Walt Disney Co. (DIS) highlights this week’s earnings calendar, with analysts expecting a profit of just $0.51 per-share on $18.77 billion in revenue. The stock has struggled so far in 2021, posting a 4% year-to-date loss, compared to 2020’s healthy 26% return. The slow pick-up of box office, advertising, and theme park revenue has impacted profits but slowing growth and high churn at the Disney+ streaming service is weighing most heavily on investor sentiment.

Boeing Co. (BA)

Boeing Co. (BA) rallied off a deep low near 200 this week, hopefully carving the last leg of a bullish triple bottom after Pfizer Inc. (PFE) announced a promising oral treatment for COVID-19 patients. The pandemic’s biggest losers shot higher in unison, with high hopes the drug will put an end to government restrictions and encourage business travelers to return to the friendly skies. The aerospace giant will issue a buy signal if it can now break out above descending trendline resistance near 227.

Shiba Inu Coin

Shiba Inu dropped into the 11th slot in cryptocurrency market cap last week, turning lower after posting an all-time high at 0.00008870 in Oct. 28. A 28% bounce on Friday ended a selling wave triggered by $42.3 billion token sale but the coin may need another leg down to attract the buy-the-dip crowd. For now, traders should focus their efforts at 50-day moving average support that’s now lifted to 0.0000375 because that’s where the big September breakout unfolded.

iShares Russell-2000 ETF (IWM)

iShares Russell-2000 ETF (IWM) broke out above a 10-month symmetrical triangle last week, lifting to an all-time high at 243.40 on Friday. It already feels like it’s too overbought to chase the uptick, suggesting late-to-the-party traders sit on their hands and wait for a pullback to new support between 230 and 234. Just keep in mind this index is best traded as a long-term position at the moment because small cap seasonality will remain highly positive until March 2022.

Wynn Resorts Ltd. (WYNN)

Wynn Resorts Ltd. (WYNN) has been battered and bruised in 2021, posting a 13% year-to-date loss, held hostage by pandemic crosswinds. It rallied into May and turned sharply lower as the Delta variant forced gamblers to forego visits to Las Vegas and Macao. Nevada revenue has come roaring back but Macao receipts continue to suffer, booking minus 40% year-over-year revenues in October, on top of minus 72% in the same month in 2020. The company reports Q3 results after Tuesday’s closing bell.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Wall Street Gains as Crude Price Surge, Strong Economic Data Prompt Broad Rally

All three major U.S. stock indexes gathered strength as the session progressed, with economically sensitive cyclicals, smallcaps and transportation stocks leading the charge.

While value stocks initially held the advantage, the risk-on sentiment gained momentum through the afternoon, broadening to include growth stocks.

“Today is the first time in a while when both growth and value stocks are doing pretty well. It’s been either or for much of the last few weeks and today it’s both,” said Chuck Carlson, chief executive of Horizon Investment Services in Hammond, Indiana. “Breadth matters, and that’s something investors like to see.”

A host of economic data showed hints of waning inflation and an ongoing return to economic normalcy, even as supply constraints, complicated by hurricane Ida, hindered factory output.

Import prices posted their first monthly decline since October 2020, in the latest sign that the wave of price spikes has crested, further supporting the Federal Reserve’s position that current inflationary pressures are transitory.

Next week, the Federal Open Markets Committee’s two-day monetary policy meeting will be closely parsed for signals as to when the central bank will begin to taper its asset purchases.

The graphic below shows major indicators against the Fed’s average annual 2% inflation target.

The Dow Jones Industrial Average rose 236.82 points, or 0.68%, to 34,814.39; the S&P 500 gained 37.65 points, or 0.85%, at 4,480.7; and the Nasdaq Composite added 123.77 points, or 0.82%, at 15,161.53.

Among the 11 major sectors in the S&P 500, all but utilities gained ground. Energy was by far the biggest gainer, benefiting from a jump in crude prices driven by a drawdown in U.S. stocks.

U.S.-listed Chinese stocks extended recent losses, as weak retail sales data pointed to a possible economic slowdown in the mainland, while Beijing’s regulatory overhaul of Macau’s casino industry further dampened appetite for Chinese stocks.

This follows a series of regulatory moves by China against major technology firms, which has wiped out billions in market value this year.

“It would be tough to buy any Chinese stocks,” Carlson said. “From an investor standpoint you don’t know what sector is next.”

“I don’t think the situation is going to get better any time soon and it’s probably going to spread,” he added.

U.S.-based casino operators Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Resorts International slid between 1.7% and 6.3%.

Apple Inc snapped a decline over recent sessions following an adverse court ruling on its business practices, and a lukewarm response to its event on Tuesday where it unveiled updates to its iPhone and other gadgets. Its shares gained 0.6%.

Lending platform GreenSky Inc shot up 53.2% after Goldman Sachs Group Inc said it would buy the company in an all-stock deal valued at $2.24 billion.

Advancing issues outnumbered declining ones on the NYSE by a 2.15-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and three new lows; the Nasdaq Composite recorded 55 new highs and 106 new lows.

(Reporting by Stephen Culp; additional reporting by Ambar Warrick and Sruthi Shankar in Bengaluru; Editing by Richard Chang)

Las Vegas Sands Could Break 11-Year Support

Las Vegas Sands Corp. (LVS) is trading lower by nearly 5% on Wednesday, within spitting distance of 2020’s pandemic low, after China proposed tighter regulation of Macao casinos. Rival Wynn Resorts Ltd. (WYNN) is dropping like a rock as well, hitting the lowest low since November 2020. Both stocks have underperformed major indices by a country mile so far in 2021, trading deeply in negative returns, fueled by ongoing weakness in U.S. and Macao gaming operations.

Heavy-Handed Regulation Ahead

China proposes to remove the current sub-concession system, appoint Communist party delegates to oversee gaming operators, and compose a new illegal deposit crime to address money laundering. That nation’s attacks against the excesses of capitalism have taken a darker tone this year, punctuated by severe gaming restrictions for minors and, as colorfully scribed by Forbes, the “protracted dismemberment of billionaire Jack Ma”.

Macao is still getting hit hard by the pandemic, with border restrictions limiting traffic. As Las Vegas Sands noted in last week’s press release, “travel restrictions and the evolving COVID-19 situation in Macao and mainland China continue to limit visitation and hinder (majority-owned) Sands China Ltd. current financial performance. The COVID-19 pandemic has materially adversely affected the number of visitors to SCL’s facilities and disrupted SCL’s operations, and SCL expects this adverse impact to continue until the COVID-19 pandemic is contained.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly upbeat, given the exceptionally poor performance, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’ and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions, even though Sands has dropped nearly 53% in the last six months. Price targets currently range from a low of $50 to a Street-high $80 while the stock will open Wednesday’s session a jaw-dropping $13 below the low target.

Las Vegas Sands topped out 60 points under 2007’s all-time high in 2014 and entered a sideways pattern that briefly undercut long-term support below 35 during 2020’s pandemic decline. The subsequent uptick carved the fourth lower high in seven years in March 2021, giving way to a steep decline that’s now stretched within four points of last year’s low.  This is a dangerous set-up due to repeated action near this level since 2011, raising odds for a secular breakdown.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

U.S. Market Wrap and Forecast for Monday

January’s Non-Farm Payrolls report added 49,000 new jobs while the unemployment rate fell from 6.7% to 6.3%. December jobs were revised sharply lower, continuing a bleak employment scenario as the Western world works through the last stages of the winter’s second pandemic wave. The equity market yawned and bonds sold off after the news, squaring positions into the weekend so that short-term options market makers get paid.

Ford vs. Tesla

SP-500 Volatility Index (VIX) fell to the lowest low since early December. GameStop Inc. (GME) shareholders declared their loyalty in a widely read Reuters article, ready to become the bagholders of a new generation. Ford Motor Co. (F) CEO Jim Farley (no relation) declared the new Mustang Mach-E will compete successfully with Tesla Inc.’s (TSLA) Model Y, forgetting that brand is everything in the third decade of the new millennium.

Snap Inc. (SNAP) recovered after a 9% post-earnings decline, lifting to an all-time high. Fitness juggernaut Peloton Interactive Inc. (PTON) fell into the 140s despite beating top and bottom line estimates and raising first quarter guidance. The company has to compete with real fitness centers in coming quarters, lowering expectations about their vertical growth trajectory. Wynn Resorts Ltd. (WYNN) hit an 11-month high despite a 58.5% year-over-year revenue decline, offering shareholders an opportunity to get out with their capital still intact.

Heading into Monday

Fourth quarter earnings season draws to a close next week, with reports from Dow components Cisco Systems Inc. (CSCO) and Walt Disney Co. (DIS) as well as Twitter Inc. (TWTR), and General Motors Co. (GM). Disney is trading near an all-time high even though their wildly successful streaming service has done little to replace income lost from empty movie theaters, dry-docked cruise ships, and socially-distanced theme parks.

Sky’s the limit for U.S. equities, at least until the Biden administration hits a brick wall with their massive stimulus bull. At least to the point, left-leaning politicians have avoided most of the logistical mistakes made by the Obama administration in 2009.  The Republican Party is trying to rebrand itself after the departure of Donald Trump and their infighting has allowed the Democratic-controlled Congress to move aggressively on economic policy.

For a look at all of today’s economic events, check out our economic calendar.

Stock Pick Update: October 21 – October 27, 2020

In the last five trading days (October 7 – October 13) the broad stock market has retraced a half of its previous week’s advance of almost 4%. The S&P 500 index set a new record high of 3,588.11 on September 2. But then the market fell below February 19 high of 3,393.52. Recently it set a local low of 3,209.45 before going back above 3,500 mark. So, the decline still looks like a downward correction of a 63.7% rally from March 23 corona virus low at 2,191.86.

The S&P 500 index has lost 2.06% between October 14 and October 20. In the same period of time our five long and five short stock picks have gained 0.08%. So stock picks were relatively stronger than the broad stock market . Our long stock picks have lost 0.54% and short stock picks have resulted in a gain of 0.69%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • October 20, 2020

Long Picks (October 14 open – October 20 close % change): CSCO (-1.63%), NI (+2.03%), CMG (+1.38%), XOM (-1.06%), SHW (-3.41%)
Short Picks (October 14 open – October 20 close % change): WMB (+1.33%), APD (-1.83%), JPM (+0.07%), NVDA (-4.51%), WEC (+1.47%)

Average long result: -0.54%, average short result: +0.69%
Total profit (average): +0.08%

  • October 13, 2020

Long Picks (October 7 open – October 13 close % change): CMS (+2.71%), RTX (+0.35%), EQIX (+4.46%), OKE (+8.35%), FB (+6.53%)
Short Picks (October 7 open – October 13 close % change): COP (+4.21%), TWTR (+2.02%), NVDA (+1.78%), AWK (+1.39%), FDX (+3.37%)

Average long result: +4.48%, average short result: -2.55%
Total profit (average): +0.96%

  • October 6, 2020

Long Picks (September 30 open – October 6 close % change): SO (+7.13%), SEE (+9.80%), MAS (-2.17%), EOG (-1.23%), FB (-1.27%)
Short Picks (September 30 open – October 6 close % change): CVX (+0.07%), VZ (0.00%), MS (+0.15%), PPL (+5.90%), NEM (-2.67%)

Average long result: +2.45%, average short result: -0.69%
Total profit (average): +0.88%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, October 21 – Tuesday, October 27 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (October 21) and sold or bought back on the closing of the next Tuesday’s trading session (October 27).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Utilities, 1 x Technology, 1 x Consumer Discretionary
  • sells: 1 x Energy, 1 x Materials, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Materials
  • sells: 1 x Utilities, 1 x Technology

Trend-following approach

Top 3 Buy Candidates

PPL PPL Corp. – Utilities

  • Stock broke above medium-term downward trend line – uptrend continuation play
  • Possible short-term uptrend continuation pattern – bull flag
  • The resistance level is at $29 and a close support level is at $27.50

WDC Western Digital Corp. – Technology

  • Stock broke above its recent downward trend line – possible short-term uptrend continuation
  • The resistance level of $45
  • The support level is at $39

WYNN Wynn Resorts Ltd – Consumer Discretionary

  • Possible breakout above short-term downward trend line
  • The resistance level of $77.50
  • The support level is at $67.50-70.00

Summing up , the Utilities, Technology and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above analysis, and we encourage you to read today’s Stock Pick Update. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Wynn Resorts Could Test 1st Quarter Low

Casino and resort operator Wynn Resorts Inc. (WYNN) fell to a 7-week low on Monday morning, with sector sentiment deteriorating at a rapid pace following months of weak visitation numbers in Macao and Las Vegas. A potential money laundering scandal at rival Las Vegas Sands Inc. (LVS) is adding to selling pressure, warning WYNN shareholders the stock could eventually test the first quarter’s multiyear low in the mid-30s.

Industry Slump Undermining Wynn Resorts Revenue

The Macao Gaming Commission and Coordination Bureau recently reported that August gross revenue fell an astounding 94.5% year-over-year while the Nevada Gaming Board’s latest release noted the July Las Vegas Strip gaming win rate dropped 39.9 % year-over-year. Domestic and international travel restrictions and COVID fears are driving the bearish metrics, ahead of a winter that could ignite a second pandemic wave.

Goldman Sachs analyst Stephen Grambling downgraded Wynn Resorts from ‘Buy’ to ‘Neutral’ earlier this month, removing the stock from their ‘Conviction List’ and dropping the price target to $95. Grambling justified the bearish call with troubling statistics about Macao operations, stating “Wynn holds outsized exposure to Wynn Macao and, after revising our forecasts to embed softer VIP in 2021, we find limited upside, given the stock’s recent run.”

Wall Street And Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 9 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time. Price targets currently range from a low of $72 to a street-high $120 while the stock is now trading on top of the low target. These predictions look way too high but the humble placement may limit downside, at least in the short-term.

Technically speaking, Wynn Resorts has been stuck in a downtrend since posting an all-time high near 250 in 2014.  The stock has lost substantial value since a recovery rally topped out near 200 in 2018, with the downside accelerating to an 8-year low in the first quarter of 2020. The bounce since that time has failed to remount the broken 200-month moving average, raising odds the decline will eventually test and possibly break the March low in the mid-30s.

For a look at all of today’s economic events, check out our economic calendar.

Wynn Resorts Struggling To Rebuild Lost Revenue

Wynn Resorts Inc. (WYNN) got hit earlier than most American corporations by the COVID-19 pandemic, with Macao hotels and casinos shutting their doors for two weeks in February, in reaction to the first outbreak in Wuhan, China. The closure of Las Vegas resorts in March completed the revenue destruction, generating a Q1 2020 loss of $3.54 per-share, or $1.85 worse than expectations. Revenue plunged an astounding 42.2% year-over-year to $953.7 million, beating estimates by more than $75 million due to excessively bearish Wall Street calls.

Catastrophic Revenue Loss

Unfortunately for shareholders, gaming aficionados are still avoiding Macao like the plague as we enter the third quarter. The Macao Gaming Inspection and Coordination Bureau just reported that June revenue fell 97.0% year-over-year, following a 93.2% decline in May. Meanwhile, Las Vegas has run into major roadblocks since their reopening began in May, with a surging epidemic in the Southwestern states generating record numbers of positive cases, persuading many visitors to stay away.

Wynn Resorts discussed the continued impact of the pandemic in June, noting that “we expect to continue experiencing the adverse effects of the COVID-19 Pandemic throughout the second quarter of 2020.” The company then disclosed that Macao operations are experiencing an average daily loss of around $2 million, which isn’t a short-term liquidity issue due to $1.71 billion in free cash flow and $24.1 million in resolving credit earmarked for Macao operations.

Wynn Resorts Wall Street And Technical Outlook

Wall Street issued a wave of upgrades in the second quarter but their growing bullishness may be misplaced, given the exceptionally slow pace of business resumption. Nine analysts currently rate Wynn Resorts as a ‘Buy’, while just four have issued ‘Hold’ recommendations.  However, it’s astonishing that no one is recommending that investors sell the stock at this time, despite steep daily losses. It’s wise to keep that in mind if thinking about long-side exposure at these depressed levels.

The current technical outlook remains extremely bearish. Wynn Resorts fell a stomach-churning 77% off the late January peak at 152, finding support at an 11-year low in March. The bounce into the second quarter reversed at heavy resistance above 100 in early June, giving way to a steady decline that relinquished more than 40 points before a month-end reversal. So far at least, price action has failed to remount key levels violated during the selloff, telling market players the stock remains stuck in a decline that could test the deep March low.