Stock Market Commentary:
Some stocks benefit greatly from an oversold bounce. Some stocks continue to dampen the mood. Today, retailers bruised an otherwise impressive continuation of the oversold bounce in the stock market. With retailers weighing down the market with poor implications for the macro environment, caution remains warranted. Still, the rebounds in the most beaten up parts of the market offer some attractive trading and investing opportunities. For example, over the weekend I reviewed the bottoming prospects for the thrashed group of ARK Fund ETFs.
Stock Chart Reviews – Below the 50-day moving average (DMA)
Upstart Holdings, Inc. (UPST)
Cloud-based artificial intelligence lending platform Upstart Holdings, Inc (UPST) has a classic signature of a stock rising from the ashes amid an oversold bounce. UPST collapsed a startling 56.4% post-earnings. The post-earnings closing low and the all-time low was the next day. This low coincided with the exact closing low of my favorite technical indicator, AT50 (T2108), the percentage of stocks trading above their respective 50-day moving averages (DMAs). Including today’s 23.5% surge, UPST is up 66.6% from the post-earnings closing low. With a close at a post-earnings high, UPST becomes a buy on the dips until/unless the all-time low breaks as support. The upside target for UPST is the former 2022 low from April.
Wayfair Inc. (W)
Online furniture retailer Wayfair Inc (W) has yet to recover from its May 5th 25.7% post-earnings loss. The accelerated post-earnings downtrend remains in place despite today’s 8.6% jump. Until W manages to close above last week’s intraday high, the stock is one of many retailers weighing down the oversold bounce.
Walmart Inc. (WMT)
There goes the “safety” trade. Walmart (WMT) is supposed to be a “safe” stock in recessionary and inflationary times. Instead, Walmart’s earnings revealed woes with inventory and labor force management and weighed down other large retailers. The entire retailing sector is now on the hotseat. WMT lost a startling 11.3% post-earnings and closed at a 15-month low. Suddenly, last month’s breakout to an all-time high looks like a big fakeout. With WMT trading well below its lower Bollinger Band (BB), the stock is a tempting buy. However, Karen Finerman’s bearishness on CNBC’s Fast Money regarding the WMT earnings news froze me in my tracks.
TJX Companies, Inc. (TJX)
Discount retailer The TJX Companies, Inc (TJX) somehow survived an initial plunge in sympathy with WMT. TJX recovered from an 18-month low to close flat on the day. This move looks like a washout of sellers especially given the initial multi-month low. I want to buy TJX here with a stop loss below the intraday low. Note that earnings are coming Wednesday morning.
Roblox Corporation (RBLX)
Online video game platform Roblox Corporation (RBLX) pulled off a bullish rebound from an initial post-earnings calamity. RBLX sold off 4 straight days going into earnings. The next day the oversold period hit its low and RBLX gapped down 5.4%. However, RBLX closed the day UP 3.4%. That bullish reversal set up the next day’s 19.2% surge. I rushed to buy a ratio calendar call spread thinking RBLX would churn a bit. Instead, the rally kept apace, and my position hit its initial profit target. I moved into the pullback with shares. RBLX trades at “only” 7x sales and actually earns profits. As a result, I like accumulating a position from here. I think RBLX is a future acquisition target given its popularity and potential to play a role in the metaverse.
Lucid Group, Inc. (LCID)
Back in the good ol’ days of speculative growth stocks, I bought the September collapse in luxury EV maker Lucid Group, Inc (LCID) in full confidence. The profits I took from the subsequent rally paid for my core position (what is called riding the house’s money). Now LCID is right back to those levels, and I am hesitating to try the same trade again. LCID is still sitting on losses from its May 5th earnings report.
The oversold bounce has not yet broken through 20DMA resistance. In fact, LCID needs to conquer the last peak just to generate enough momentum to challenge overhead resistance from the declining 50DMA. This stock market is simply not the place to take a swing on a profitless company valued at 355x sales. I will just remain patient (for who knows how long). Of course I still LOVE the company and the car.
FIGS, Inc. (FIGS)
I knew FIGS, Inc (FIGS) was on the expensive side. Still, last week’s post-earnings collapse surprised and disappointed me. I guess there are not enough people buying into my idea to wear medical scrubs as comfort wear. FIGS crashed 25.0% post-earnings and has only rebounded meekly with the oversold bounce. The company lowered guidance “citing macro factors and supply chain challenges.”
Teladoc Health, Inc. (TDOC)
Teledoc Health, Inc (TDOC) is still convalescing after a 40.2% post-earnings thrashing. TDOC was last at these prices in early 2018. Undeterred, Cathie Wood and team loaded up on yet more shares of TDOC. Here is what the team had to say about the disaster in its weekly email covering the portfolio’s big movers:
“Our five-year thesis for Teladoc is built around the company’s transition from a general telehealth provider to a B2B enterprise solution for whole-person healthcare. To measure the company’s progress, we track utilization––which has increased 160% since 2019––multi-service adoption––which has increased from 67% to 78% over the past year––and competitive wins. One recent example is its new contract with Northwell, New York’s largest health system, which Teladoc won from a competitor based on its multi-faceted platform.
That said, given the tumultuous market dynamics in digital care, management would have served shareholders and other stakeholders better with a strategy of under-promising and over-delivering. Nonetheless, we do believe that Teladoc’s long-term competitive position and product differentiation are unmatched, gearing it for superior growth over the long term.”
This commentary was the FIRST time I have seen the ARK folks say anything close to negative about a portfolio company.
If TDOC is doing anything right, the stock chart has obscured the promise since the all-time high in February, 2021. TDOC is down 89% from those lofty times. Trading at 4+ year lows indicates the pandemic meant nothing during a the best of times for telemedicine. Now priced at 2x sales and 0.5x book, TDOC truly looks under-valued. At its peak valuation, TDOC traded close to 25x sales. I imagine the company could truly be a steal of a deal when it finally starts earning profits.
NVIDIA Corporation (NVDA)
Even mighty semiconductor chipmaker NVIDIA Corporation (NVDA) has suffered in the April to May sell-off. March’s bullish 50DMA and 200DMA breakouts are a distant memory. Now NVDA trades under its downtrending 20DMA and just rebounded from an 11-month low. NVDA trades at a 45.6% discount to its all-time high. With a still extremely rich valuation of 17x sales and 17x book, I am not putting NVDA on the shopping list. There are other semiconductor companies of interest…
Stock Chart Reviews – Above the 50DMA
Advanced Micro Devices Inc (AMD)
The oversold bounce has helped push semiconductor chipmaker Advanced Micro Devices Inc (AMD) over its 50DMA. An upgrade helped provide the fuel. AMD will be in a bullish position if buyers follow through from here. Still, overhead resistance at the 200DMA looks likely. AMD has a relatively attractive valuation of 5.9x sales and 2.6x book. If I did not already own shares, I would start accumulating here. I am definitely moving to add shares if AMD returns to or through its last lows.
Be careful out there!
Footnotes
Source for charts unless otherwise noted: TradingView.com
Full disclosure: long RBLX, long FIGS, long AMD
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*Charting notes: Stock prices are not adjusted for dividends. Candlestick charts use hollow bodies: open candles indicate a close higher than the open, filled candles indicate an open higher than the close.
Grammar checked by Grammar Coach from Thesaurus.com
semiconductors have bottomed
I sure hope so!