Aug 31 Weekly Commentary and Stocks Selection

Hello Folks,

The Stock market rally took back its mojo on Friday after a brief pause. Inflation has cooled down, broad economy is holding up well, Friday’s personal income and July spending reports showed inflation is well within Fed’s targets hence providing tail winds to the Stock Market rally besides Nvidia tumbling down after its latest earnings report. With the upcoming interest rate cuts, sectors like Financial and Industrial are likely to perform well but at the same time, traditional growth sectors like Technology (including Semiconductors), Discretionary and Communications are either retreating or consolidating. Look at last week’s S&P Sector performance:

Sector Weekly Performance

Financials, XLF: +2.95%

Industrial, XLI: +1.69%

Materials, XLB: +1.67%

Utilities, XLU: +1.15%

Health Care, XLV: +1.13%

Energy, XLE: +0.98%

Staples, XLP: +0.82%

Real Estate, XLRE: +0.42%

Communications, XLC: -0.21%

Discretionary, XLY: -0.40%

Technology, XLK: -1.62%

From the above table, it is clear that money is flowing from growth sectors to the more value-oriented sectors. Technology and Communications have performed very well on YTD basis but currently a sector rotation is in place amid the upcoming rate cuts. Apart from September, both Financials and Industrials sectors love the fourth quarter and traditionally have performed well during the last 3 months. Therefore, we can continue to see more sector rotation and better performance from players of these sectors compared to the growth sectors.

Meanwhile, September is traditionally a weak month for the overall stock market, especially the S&P 500 stocks, therefore, we should remain cautious in our selection and should wait for a pullback to better entries rather than chasing the stocks.

Major Indices:

The recent performance of major Indices is as follows:

Index Friday (8/16) Weekly YTD

S&P 500: +1.01% +0.24% +18.42%

Dow Jones Ind: +0.55% +0.94% +10.28%

Nasdaq 100: +1.29% -0.74% +16.34%

Nasdaq Comp: +1.13% -0.92% +18%

Russell 2000: +0.58% -0.14% +10.24%

If we look at RSP (S&P 500 Equal Weight ETF), it is continuously trending higher, which shows overall market breadth is strong and it is not just the magnificent seven stocks which are outperforming the rest of the market (as occurred during the first half of year 2024).

Important Events next week:

Tuesday: ISM Manufacturing PMI

Wednesday: JOLTS Job openings

Thursday: GDP, Initial Jobless Claims, ADP Nonfarm Employment Change, Global Services PMI

Friday: Nonfarm payrolls, Average hourly earnings, Unemployment rate

Important Earnings this week:

Tuesday (9/03): HealthEquity (HQY), Zscaler (ZS)

Wednesday (9/04): Dick’s Sporting Good (DKS)

Thursday (9/05): Broadcom (AVGO), Samsara (IOT), DocuSign (DOCU)

Actionable Stocks:

Long-Term View: These stocks have been identified as long-term holdings in our recent commentaries:

MSFT:

Microsoft continues to consolidate below its 50-day EMA line. The September effect could lead to more time for regaining its key moving averages. Remains a long-term buy

NVDA:

Although Nvidia beat its quarterly earnings estimates (both top and bottom lines) but it look like that investors were expecting much more. Nvidia has built a strong moat in the AI (Artificial Intelligence) market with the cutting-edge processors. Besides the increasing competition from companies like AMD, Nvidia is likely to dominate the market in the long term, becoming a new Tesla for investors. It remains a long-term buy and has regained its 50-day EMA line but is likely to consolidate during the month of September. Any pullback will provide an opportunity for keen investors to hop back in.

AAPL:

Apple is launching its new line of iPhone 16 series on September 9. The recent pullback below 200 offered lucrative entry for anxious customers. Apple is likely to consolidate at these levels before making the next leg up. Any pullback to 207-215 will provide another possible entry to get onboard. Otherwise, a new breakout past its all-time high at 237.23 will be very bullish.

COST:

As mentioned last week, Costco broke out from the 900 level and registered an all-time high before pulling back below 900. Any pullback to 850-870 range will provide an alternate entry to this long-term leader.

Medium- and Short-Term Picks:

META:

As expected, Meta has been showing resilience and consolidating at these levels. The seasonal weakness and November elections could temporarily hold back the stock but in the longer run, Meta is likely to break out from current levels based on its strong moat in the Communication Industry and a huge customer base. Levels like 515 (EMA 20) or 503 (EMA 50) offer better entries. In any case, the stock seems poised for long-term appreciation.

PDD:

PDD missed its revenue targets despite beating the bottom-line earnings guidance. PDD tanked by 31% after the results. Although it found support at its 200-Days EMA line, it is expected to consolidate at these levels or even go down further. Therefore, PDD is dropped from this list till the time Stock is repaired.

AMZN:

Amazon has retaken its 50-Days EMA line and is sitting just below the 20-days EMA eyeing to move back. Any sustained move beyond 181 would result in a test of its previous high of 201. Among the Magnificent 7 stocks, Amazon is well suited to move higher on the medium and long-term basis.

Interesting Stocks for possible actions:

ONON:

ONON gained 5.41% in the week and has been rising steadily for the last 4 weeks. Since its IPO in 2021, the stock has surged by 90% and the long-term trend is likely to continue but in the short term it could pull back and could offer a better entry at 39 level for interested investors.

CMG:

We are reconsidering Chipotle after its recent sharp pullback. We think any move beyond its 20-day EMA line (56.56) will provide an opportunity to go back and test its highs of 69. Chipotle has been a consistent performer for the last several years and the uptrend is likely to resume.

ZM:

Still waiting to move past 75. Till then, hold and wait as mentioned in last week’s commentary.

NEE:

This Utility stock is ideal to park some money and get a nice dividend (2.55%) along the way. The stock has made a break out above its previous high of 79.95. It is expected to move upward and test previous highs in 85-87 range.

BYDDF:

Tesla’s biggest Chinese rival BYD reported solid earnings but missed on sales, but analysts expect it to report higher sales for August and furthermore in September. BYDDF broke out past and surged by 4.31% on Friday. It is actionable at current levels and is expected to test its highs between 31.67-32. Please note that being a Chinese stock, it is highly volatile and could swing 5-10% easily in one day.

FOUR:

Shift4 provides integrated payment processing and technology solutions in the US. With financial stocks expected to perform well in the upcoming quarter, Shift4 is likely to benefit and continue its journey upwards from the current levels.

NTRA:

Mentioned last week, Natera pulled back slightly but is still in actionable range. It is likely to resume its upward journey after a consolidation pause.

TW:

Mentioned last week, this Financial / Investment services stock is likely to continue its growth amid interest rate cuts providing a boost to the financial sector. The stock is still actionable at its current prices with a tight stop loss around 110 level.

TTD:

Mentioned last week, the Trade Desk is likely to perform well in future amid good fundamentals. It has recently staged a breakout from 102.40 and could provide a test of its recent highs at 114.09

Website:

Note: Our website is now up and running. Please review our offers and if interested in our Excel based software, the TR (Trend Recognition) Indicator and the commentary then you could purchase it on:

https://analyzestocks.net

or visit our Etsy store at:

https://www.etsy.com/listing/1540978608/advanced-excel-stocks-analysis-and

All customers will continue to receive the Market commentary for a period of 1 year from the date of the purchase.

Also, kindly subscribe to our YouTube channel to obtain the latest news and information about our products at

https://www.youtube.com/channel/UC8aS_P5xpWUDVG5IDdSjGEg

Happy Trading and best regards,

Disclaimer:

The information provided here is for educational / learning purposes only and should not be taken as purchase or sell recommendations. Trading / Investing in Stocks and derivatives is highly risky and could result in a substantial or complete loss of invested capital.

Employees and Owners of MJ Software LLC are not registered Financial Advisors with FINRA or SEC and for any financial advice please consult a registered financial advisor.