EB Daily Market Report - Monday, November 23, 2020
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Thanksgiving Holiday Schedule
U.S. markets are closed in observance of Thanksgiving Day on Thursday, November 26th. U.S. markets close at 1:00pm ET on Friday, November 27th. EarningsBeats.com will be closed Thursday and Friday, although there may be a brief Daily Market Report issued on Friday morning.
Executive Market Summary
- Futures were strong overnight, and strengthened further with more positive vaccine news
- Astrozeneca (AZN) announced positive vaccine trials, but didn't receive the positive response that Pfizer (PFE) and Moderna (MRNA) received the past two Mondays
- Regeneron Pharmaceuticals (REGN) received Emergency Use Authorization from the FDA for its antibody cocktail to treat COVID-19 and spiked 4% at the open, but it's given those gains back
- Energy (XLE, +5.38%) is once again the big winner from the vaccine news as crude oil ($WTIC) has jumped more than 1% to nearly $43 per barrel
- Despite the positive vaccine and COVID-19 treatment news, health care (XLV, -0.70%) is the worst performing sector
- Apple (AAPL) and a host of health care stocks - JNJ, AMGN, and MRK - are holding the Dow Jones back, despite this index of conglomerates rising close to 1% today
- Small caps ($SML) and mid caps ($MID) are providing leadership to start the week
Market Outlook
I remain quite bullish, especially if the S&P 500 continues to trade above key gap (3509) and 20 day EMA support (3519). The rotation that's taken place is fairly evident on this S&P 500 chart that shows the relative strength of our 5 aggressive sectors:
The bottom two panels highlight the improvement in relative strength in both the XLI and XLF, although the XLF's began just two weeks ago with the positive vaccine news. The XLI's relative strength started all the way back in May, so I find it much more reliable at this point in time.
Sector/Industry Focus
Using the industrials sector (XLI) as an example, I want to show you how I try to combine the daily and weekly charts. The first chart below will be the XLI daily chart. Be sure to check out how the October lows fell below the 50 day SMA. The second chart will be the XLI weekly chart. During that same October time frame, I want you to see how the rising 20 week EMA held beautifully as support.
XLI daily:
XLI weekly:
The red circles on the daily chart suggested a possible breakdown as the PPO centerline and 50 day SMA were both lost. But the green circle on the weekly chart showed that exact same pullback testing an excellent long-term level of support - the 20 week EMA. It's one example of using different time frames together before making a decision. You should always be aware of the long-term time frames before you pull the trigger using a shorter-term time frame.
ChartLists/Strategies
Here are a couple different trading ideas given different strategies:
High volume:
I ran a scan of our Strong Earnings (SECL), Strong Future Earnings (SFECL), Short Squeeze (SSCL), and Raised Guidance (RGCL) ChartLists, looking for any companies that had traded more than 1.75 times their average daily volumes as of 1:45pm ET. There were 14.
HIMX was very interesting:
I like to see these types of breakouts on heavy volume. The AD line is also strong, suggesting this could be the result of significant institutional accumulation. Remember, smaller companies are growing in strength. HIMX had fallen from 14 to 2 over a two-year period, but it's recent strength is making up some of that ground. I'd prefer to see HIMX pull back to price support and/or its rising 20 day EMA.
Downtrend Reversal
Using the scan we have on our website, I found that 4 stocks are reversing recent downtrends, defined as 5 days in a row of lower price highs.....until today. The four stocks are CYRX, DOYU, MDGL, and REGN. The latter received "emergency use authorization" designation from the FDA for its COVID-19 antibody cocktail infamously provided to President Trump in October. While the news is certainly positive, Wall Street's reaction, other than the opening gap higher, has been anything but bullish. The higher high in price could get things going for REGN, but I'd really like to see a strong finish too.
MDGL shows fairly light volume overall, so personally I'd avoid it based on that alone. The other two, CYRX and DOYU are interesting, however.
CYRX:
CYRX is volatile, but has been a 2020 leader in the containers & packaging industry ($DJUSCP). The possible reversal is also coming near key gap support at 45.63.
(Disclosure: I own CYRX)
DOYU:
DOYU is part of a very strong and strengthening broadcasting & entertainment group ($DJUSBC). DOYU gapped up on very heavy volume in October on nearly 24 million shares, but has slowly worked its way back to both gap and price support. The 13.25-14.00 area represents solid reward to risk entry.
(Disclosure: I own DOYU)
Earnings Reports
Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.
Monday, November 23:
A, WMG, ARWR, NTNX, TWST, DQ, URBN, NIU, CBT, CENT, AMBA, KFY
Tuesday, November 24:
VNET, ANF, AEO, ADI, PLAN, ADSK, BBY, BURL, CHS, DELL, DKS, DLTR, GPS, GES, HRL, HPQ, SJM, MDT, J, JWN, PSTG, TIF, VMW
Economic Reports
November PMI composite flash: 57.9 (actual) vs. 55.6 (estimate)
Happy trading!
Tom