Sep 13 Market Analysis and Stocks Picks

Hello readers,

The Stock Market experienced a sharp revival and set aside the seasonal weakness last week as it registered its best week of the year. Take a look at the performance of major indices:

Index Friday (13/09) Weekly YTD

S&P 500: +0.54% +4.02% +17.95%

Dow Jones Industrial: +0.72% +2.6% +9.83%

Nasdaq 100: +0.47% +5.95% +15.98%

Nasdaq Composite: +0.65% +5.95% +17.80%

Russell 2000: +2.47% +4.3% +8.61%

Markets rebounded sharply Monday afternoon after bullish remarks by Nvidia CEO on its Chip business and upcoming products’ demand. Nvidia stock has sent investors on a wild ride so far in 2024, it was trading at a split-adjusted price of $48 at the beginning of the year. It reached as high as 140 in June, plunged to 99 in August only to rise back to 130 and is currently trading at 119. The market was also buoyed by Oracle’s earnings and future guidance showing its potential to become the next trillion-dollar club member (Nvidia, Microsoft, Meta, Apple, and Google are already there), although it is worth $429 now. Oracle’s revenue from data centers is surging while several AI leaders like OpenAI are using Oracle’s products for their software and data centers.

While market rebound is welcomed, we should not lose sight of the short-term challenges, especially to the growth sectors (Tech, Discretionary, Communications) and the overall market in general. Since 1950, the second half of September has been the weakest period of the year in terms of overall return. The following table shows the returns of major indices during the second half of September:

Period S&P 500 Nasdaq (since 1971) Russell 2000 (since 1987)

Sep 1-16 -8.14% +6.03% +25.61%

Sep 17-20 -26.77% -31.65% -39.73%

Sep 20-26 -44.06% -52.35% -83.85%

If history is any guide, then Sep 17-26th is the weakest period and we should be aware of this fact. Not only this, but Market has also already priced in a 50 basis point FED Interest rate cut in its upcoming announcement on Wednesday. Any cut below this level could trigger an immediate selloff and a short-term correction while above 50 basis points could lead markets to surge higher.

Important Events next week:

Tuesday: Core Retail Sales, Industrial Production

Wednesday, FOMC Interest Rate decision, FED president conference

Thursday: Initial Jobless Claims, Philadelphia Manufacturing Index, Existing Home Sales

Important Earnings this week:

Majority of the companies in S&P 500 and Nasdaq have already announced their results for the 2nd Quarter 2024, so not much is left for the recent week:

Actionable Stocks:

Long-Term View: We still believe that the long-term trend is intact hence if investors have enough cushion on these stocks, then they could hold it for the long-term. In any case, once you have 10-15% profit on any stock then do not allow it to go down and end up in a loss. Cut down your losses or at least close the positions at par. We can always re-enter a stock later.

Long-Term Stocks:

MSFT:

Microsoft rebounded but it is still in the middle of its current trading range (385 – 467). Long-term, it is still our favorite but any break below 400 in heavy volumes could push it lower temporarily.

NVDA:

Nvidia got a boost from its CEO’s comments on its AI related chips and strong demand for its products, but it is still trading in a range and could again come down to test 100 level (just like it did on Monday) or even go further to test its 200-Day EMA at 94.55. Overall expected weakness in the Technology sector for the next two months leads us to hold any buys for a better entry.

AAPL:

Apple introduced its new lines of iPhone, and the much-awaited AI based features. It is now trading in a tight range and any test to 200 -206 level will provide an alternate entry for the long-term leader.

COST:

As mentioned last week, this long-term leader recovered the mild losses and registered a 4.49% rise last week. Since it is close to its all-time highs, we believe any pullback to 800 or 793 levels will provide a better entry. Till then, keep it on the watchlist.

Medium- and Short-Term Picks:

META:

Meta is also trading in a tight pattern and could come down in the short term with the broader market. Better to look for an entry around the 50-day EMA at 442.45. Meta is in an uptrend and generally when stocks are in an uptrend, tight patterns result in a continuation wave.

AMZN:

As mentioned last week, Amazon is still above its 50-Days EMA line and is likely to test it again at 168.19. Long-term, it is well suited to move higher on the medium and long-term basis. Till then let us keep it on our watchlist. A buy on a breakout above 200 could also be initiated.

Interesting Stocks for Watchlist:

As stated above, for the next 1-2 months, we are not considering new positions in the Tech sectors amid seasonal weakness and the roller coaster stock market. Instead, we are looking for companies which have strong fundamentals, continuous earnings growth and are expected to increase their earnings in future as well, so even if they drop with the broader market, chances of their rebound are stronger based on their relative strength to the rest of the market. Here are some stocks to consider:

CMG:

Chipotle is slowly taking back its lost ground and has crawled above its key moving averages. Any break above 56.98 will be bullish and could eventually lead to a test of 62.96 and beyond. If an entry is made at the current levels, then the suggested Stop Loss should be around 52.65.

PHM / DHR:

Housebuilders are expected to benefit amid upcoming FED rate cuts and the rising demand for new housing in the US. Both Pulte Group and D.R. Horton are currently actionable and could provide handsome returns in the short and medium terms.

NEE:

Next Era Energy continued to march higher but seems a bit extended at current levels as it is not a growth stock, and utilities move slowly. Any pullback to 20-day EMA (80.56) will be a buy.

IOT:

Samsara provides sensors and cloud-based software to manage vehicle fleets and operates an Internet of Things platform offering GPS tracking. The uptrend is likely to continue in future for this sensors and cloud-based software form. Suggest a wait till a pullback to 39.80 – 42.64 range.

ORCL:

Oracle is the stock to watch in the future after its recent breakout. It could become a wall street darling and the next trillion-dollar company amid its continuous Cloud business growth and AI focus. However, it is expected to close the recent gap b/w 145-153 at which time it would be actionable.

TTD:

The Trade Desk has made a breakout and is likely to perform well in the 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

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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.

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