Weekly Commentary November 3, 2023

Hello,

On Oct 18th, It was mentioned in the last week commentary that the upcoming week was historically the worst week of the year so "raise your guards" and be very cautious, while on Oct 26th, it was mentioned that the upcoming week could be a reversal week as it had been the best week since 1950. Both of these observations were found valid as the earlier week was very brutal and the last week has been found very encouraging as the stock market rally had its best week of 2023. Here is how markets and some stocks which were mentioned last week performed:

The Nasdaq Composite was the strongest of the indexes as it jumped 1.4% on Friday and recorded a weekly gain of 6.61%. S&P 500 followed with a 5.5% gain for the week while the small cap Russell 2000 Index vaulted 2.7% on Friday and registered a 7.7% increase for the week. The encouraging market bounce enabled many stocks to flash buy signals and move above their 50 days or 10 week moving averages. Market breadth was also very good after weeks of weak results as advancers outpaced decliners, so did the new highs vs new lows.

However, as the market rally continues, it could hit short-term resistance especially during the monthly options expiration period in 3rd week. A phenomenon known as the Maximum Pain theory. This is where profit taking kicks in and normally the market makers also try to reduce the in-the-money premiums on expiring call options. It is normal for many strong stocks to take a pause or pull back during this period before resuming their journey if the rally has legs.

Performance of some of the stocks mentioned last week:

TNK: 7.74%

TW: 4.61%

MSFT: 6.52%

FTI: 2.92%

ON: -22.37%

For ON, it was mentioned that earnings could have an impact on its immediate performance therefore, care must be taken on this. Market did not like its future guidance and punished the stock. However, it remains in our long-term watchlist.

Actionable Stocks:

CVX: The Oil giant Chevron has been punished heavily recently after the announcement of Hess Corporation acquisition. On YTD basis it is 17.76% down, but the fundamentals of a strong business are there as Chevron plans to ramp up its annual production levels. It has a very good dividend yield of 4.1% which will further improve with the recently announced 8% dividend hike and a stock buyback program, both will effectively increase its yield.

If you are interested in a strong dividend payer and invest on long-term basis then Chevron could prove to be a bargain at the current levels. It will take a while to move out from a consolidation at these levels but in the longer term is poised to give an above average dividend yield and likely to come back to its 170-180 range.

MSFT: Microsoft is still in a buy range after an increase of 6.52% last week.

INSW: Besides our mention of TNK last week, this oil shipping and transport company has also shown consistent price action and is actionable at current prices.

META: After a mammoth rise this year, the Facebook, WhatsApp, and Instagram parent is showing strong price action and is also expected to continue its momentum in near future.

NVO: Mentioned last week as well, NVO Nordisk is a Danish Pharma company has two promising weight loss products (Ozempic and Wegovy). The Company is expected to thrive on their future sales. The stock is trying to break past 100 level.

WFRD: Another Energy player, this stock is showing a positive action and is actionable at current price levels.

Stop Loss:

As a sound risk management practice, we suggest that a maximum of 7-8% stop loss should be observed in general to keep losses at minimum in case a stock takes an unexpected turn which at times every stock will do.

Stocks under watch:

FTI: Another energy player, this stock made a strong move on high volume on previous Thursday and continued its upward movement with Market, however, a better entry would be a retest of 20 days or 50 days EMA line(s).

DECK: Deckers Outdoor beat both on top and bottom lines (revenue and earnings) causing a jump out of its current base. Stock has good fundamentals but after its gap up it is likely to consolidate and test the gap at 545 at that price it could be a good buy. Keep under your radar as it seems extended at current prices.

ON: Although the stock is broken at current prices but as a long-term leader it is under watch till the time it crosses its 30 Week moving average line.

SHOP: The online shopping platform gapped up on its earning on Thursday. Shopify stood out over competitors by offering an easily customizable site both for sellers and customers. So far, Stock has risen 70% for the year although it still sells at a 66% discount from its 2021 high. A recovery could be on its way and stock will be very attractive if turns back and test its 30-week EMA line.

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Happy Trading and best regards,

Ghulam Sabri

MJ Software LLC

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.

I am not a registered Financial Advisor with FINRA or SEC and for any financial advice please consult a registered financial advisor.