EB Daily Market Report - Wednesday, January 20, 2021
Executive Market Summary
- Futures were strong this morning after Netflix (NFLX) blew away subscriber estimates and raised both revenue & EPS guidance
- The NFLX news has lit a fire under NASDAQ stocks as that index is clearly the best performing
- It's also strengthened the growth vs. value (IWF:IWD) argument with that ratio challenging a 2-week high
- Big market cap NASDAQ names like GOOGL, AMZN, NFLX, AAPL, MSFT, etc. are performing exceptionally well
- Commodities ($CRB) are mostly higher as the U.S. Dollar ($USD) is flat; the 10-year treasury yield is also unchanged
- Communication services (XLC, +3.55%) is having another strong day on the heels of that NFLX earnings report
- 9 of 11 sectors are higher today, with only financials (XLF, -0.50%) and consumer staples (XLP, -0.02%) in negative territory
Market Outlook
The NASDAQ is showing leadership today and it's very solid on its hourly chart with momentum strong:
The 3 month channel remains intact and NASDAQ shares remain poised to head higher, though pullbacks can never be ruled out. I wouldn't expect a significant selloff, however, until we see a negative divergence print here.
Sector/Industry Focus
Two days ago, communication services (XLC) appeared to be one of the worst sectors, but it's bounced off both absolute and relative price support. The key was holding absolute price support near 65:
I'm a huge believer in price support/resistance and the above chart is a perfect illustration how it works. There were 7 different trips to 67.50-67.75 without a single breakout. That has changed today.
ChartLists/Strategies
Today, I ran a scan of our Strong Earnings ChartList (SECL), looking for stocks pulling back. From our website, I copied the RSI scan syntax, which looks for companies that have seen their RSIs fall back into the 40-50 area, typically a solid entry point into a rising stock. I added that the SCTR (StockCharts Technical Rank) must be > 70. This scan returned the following 8 stocks:
TX, OCUL, TTD, OMI, MRTX, SCHN, YETI, CAE.
OCUL looks very interesting to me. I'd really like to see a reversing candle on the 50 day SMA, but the reward to risk is so much better now that it's pulled back from 24+ to 19+:
NKE, though not part of the above scan, looks interesting as it reverses off of a double bottom. I believe it's heading higher to break out:
(Disclosure: I own shares in NKE)
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.
Wednesday, January 20:
PG, UNH, ASML, MS, USB, BK, KMI, DFS, FAST, CFG, UAL, CBSH, AA, PLXS
Thursday, January 21:
INTC, UNP, IBM, ISRG, CSX, TFC, TRV, PPG, SIVB, BKR, FITB, NTRS, MTB, KEY, STX, FCEL, TCBI
Economic Reports
January housing market index: 83 (actual) vs. 86 (estimate)
Happy trading!
Tom