Stock Market Commentary:
With the prospects of a bottom for this bear market, I am getting a little more interested in individual stock narratives. The bear market rubble is extensive. The gems are dispersed across a wide area. These stock charts provide one framework for sifting through the trash and the opportunity.
{note: in this edition, the stock charts have a linear scale. Charts will go back to log scale going forward}
Stock Chart Reviews – Below the 50-day moving average (DMA)
Spotify Technology (SPOT)
Since suffering a 12.4% post-earnings loss, Spotify Technology (SPOT) has been making a quiet comeback. SPOT has reversed those losses and now floats above its 20-day moving average (DMA) (the dotted line below). Overhead resistance at the 50DMA (the red line below) presents a major test. Since the November 50DMA breakdown, SPOT has only managed to close above this line of resistance ONCE. Thus, I will treat a confirmed 50DMA breakout as being very bullish for SPOT.
Nucor Corp. (NUE)
Steelmaker Nucor Corp (NUE) suffered a blow-off top along with April earnings. The stock finished with a 3.8% gain but had a 12.0% gain before sellers took control. Sellers continued the pressure with an 8.3% pullback that confirmed the blow-off top. NUE has not been the same ever since. May’s defense of 200DMA support (the blue line below) gives some hope of stabilization.
The blow-off top particularly sticks out because Nucor’s guidance could not get more bullish: “We expect that the second quarter of 2022 will be the most profitable quarter in Nucor’s history, surpassing the previous record set in the fourth quarter of 2021.” Is this as good as it gets?
Lyft, Inc (LYFT)
Lyft, Inc (LYFT) has essentially been lifeless since its 29.9% post-earnings collapse. A Bollinger Band squeeze is converging on the meandering price action. The resolution of the squeeze could catalyze the next big move. I want to trade in the direction of the break. Note that LYFT hit an all-time low of $16.05 at the pandemic lows in March, 2020. Thus, the coming squeeze is also a critical test of LYFT’s remaining resilience. LYFT IPO’d at $72 in April, 2019 and never closed higher.
Carvana Co. (CVNA)
Online used car company Carvana Co. (CVNA) was a pandemic darling. CVNA already had a churning uptrend in place when the pandemic hit. The largesses of stimulus turbocharged CVNA as the stock accelerated from a low of $29.91 to $370.10 in 16 months. With the stock now back to those pandemic lows, it is hard to even imagine what the excitement was all about…. even with the historic run-up in the price of used cars.
With the stock now trading at a mere 0.2 times sales, CVNA should look like a bargain. Unfortunately, Carvana continues to record negative operating income. If CVNA could not profit during the most favorable environment for used cars in decades, how will it earn positive operating income in a slow-growth or recessionary environment? With a ballooning debt load, CVNA will need to dilute shareholders with stock offerings and/or do some fancy refinancing to heal its financials.
Insider buying adds to the intrigue on CVNA. It is perhaps telling that, so far, the stock has not received a boost of encouragement from the purchases.
BHP GROUP LIMITED (BHP)
The 200DMA continues to provide approximate support for diversified commodities producer BHP Group Limited (BHP) for most of this year. I decided to stay out of the stock until it can print a bullish breakout above its 50DMA.
Walmart Inc. (WMT)
My post-earnings trades in Walmart Inc (WMT) proved timely. I took profits on the call option and then the call spread across Friday and today. I am holding my shares for the long-term recovery.
Nutanix, Inc. (NTNX)
I almost forgot about Nutanix, Inc (NTNX), and a 23.0% post-earnings collapse made me wish I had never remembered the stock. I made the bullish case on NTNX almost two years ago. From there, I successfully traded in and out of the stock. So in March when I saw NTNX traded back to those levels from two years ago, I jumped on the shares. Things looked pretty good until the new lows in May. I ignored that pre-earnings warning sign. NTNX traded as low as $13.51 but did not quite reach its pandemic lows.
I cannot help thinking NTNX is a steal here for the original bull case, but I will stay patient. There is no point in chasing the stock downward. I am fine to wait for a post-earnings closing high.
CME Group Inc. (CME)
I expected an exchange like the CME Group Inc (CME) to do well in the frenetic trading characterized by this bear market. Instead, CME broke down like so many others. CME found support at last September’s lows but could struggle to push through its downtrending 20DMA. A breakout above that resistance would quickly put a run to converged resistance at the 50 and 200DMAs into play.
ISHARES 20+ YEAR TREASURY BOND ETF (TLT)
In early April, I wrote about a put option trade in iShares 20+ Year Treasury Bond ETF (TLT) called “Trading Around Soaring Interest Rates.” Amazingly, the trade is working almost exactly as I would have hoped. Last week, I took profits on the short side of the trade. Today’s 2.1% drop in TLT took the long side to even. I held my ground on closing out the trade to see whether sellers have any follow-through this week. I am also holding weekly puts expiring on Friday.
Stock Chart Reviews – Above the 50DMA
Corning Inc. (GLW)
Corning Inc (GLW) was looking pretty resilient with a bullish post-earnings breakout in January. The 2-week run was as high as GLW would get for the year to-date. GLW turned in a much more modest positive performance in April. Now GLW is struggling to hold a pivot around its 50DMA. I never got a position in GLW. I am now just waiting for the next 200DMA breakout.
Dollar Tree, Inc. (DLTR)
Earnings for Dollar Tree (DLTR) helped bring the week of retail pain to an end…. and I breathed a sigh of relief. The wild gyrations in DLTR demonstrate just how little the market understands sometimes. DLTR cratered 14.4% in sympathy with Target (and Walmart) earnings. Technical traders sniffed out the opportunity by holding ground at 200DMA support. A 21.9% post-earning surge took DLTR right back where it started. The stock is now trying to hold 50DMA support…and I am trying to find reasons to keep holding the stock. I will have to preserve profits on a fresh post-earnings close.
Ulta Beauty, Inc (ULTA)
Like Dollar Tree, Ulta Beauty, Inc (ULTA) fought back sympathy selling in retail with its own post-earnings surge. ULTA soared 12.5% and almost challenged its all-time high set just in April.
THE BEACHBODY COMPANY, Inc. (BODY)
I almost gave up on health and wellness platform The Beachbody Company (BODY). However, a series of timely purchases by CEO and Chair Daikeler Carl gave the stock a fresh burst of hope. Carl spent almost $1M accumulating stock. Now BODY has a confirmed 50DMA breakout. I like adding to my shares here. Negative operating income is one of the bigger risks for the company
Be careful out there!
Footnotes
Source for charts unless otherwise noted: TradingView.com
Full disclosure: long BODY, long DLTR, long WMT, long NTNX, long TLT puts,
FOLLOW Dr. Duru’s commentary on financial markets via StockTwits, Twitter, and even Instagram!
*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