Gas Prices Are Soaring, Apple Tanks Facebook

Feb 06, 2022 | How can Traders Take Advantage of Oil Price Swings?

Weekly Newsletter- Week of 2.6.2022

Sky High Gas Prices Amid Higher Inflation

The stock market closed out last week on a positive note as a new market rally may have begun to form. This comes after months of selling which has pushed numerous quality stocks deep into oversold territory. The Nasdaq closed the week up nearly 2.5% which represented its second straight winning week. Something that hadn't happened for the technology index in months. The S&P also took home another win this week notching 1.5% higher. Though both major indexes ended green, they both closed off their weekly highs while market concerns seem to rising almost as quickly as your gas prices.

Disney On Deck

While many of the key players within the DOW have already reported, Disney will announce earnings this upcoming Wednesday. Disney was originally one of the hardest-hit stocks on Wall Street when the pandemic first started. Though that came as little surprise given their obvious exposure to industries such as movies and entertainment, travel, cruise lines, and hotels. As the pandemic roared on, Disney stock was held completely afloat by their streaming platform D+. After receiving meteoric subscriber numbers, Disney stock has been down due to slowing numbers from its streaming division. D+ subscriber data will be a key metric to watch when assessing Disney’s stock. We expect a sharp year-over-year revenue increase for Disney, seeing as how many of their core operations weren’t even in business a year ago.

This Week from The Fed

The FED will release the latest numbers regarding the Consumer Price Index (CPI) this Thursday before the opening bell. We’ve talked extensively in the past about the CPI and its importance to the market in previous newsletters. The CPI is of the key data points used to assess overall inflation within the economy. The CPI recently hit a 39 year high, with the CPI gaining close to 8% since this time last year. Though we expect CPI to once again increase, we're expecting a moderate increase while we look for signs of slowing inflation. Wall Street has been underestimated the CPI in 8 of the last 10 months, so don't be surprised by another shocking CPI increase.

What’s it Mean:
Oil prices have been steadily increasing and we closed last week on a 7-week high. Energy, oil, and the Fed's latest inflation updates will be key market drivers affecting overall market sentiment this week.

This Week’s Picks

EDR (Endeavor)

August 14, 2022

Entry Price:

24.50

Stop Price:

23.35

Target Price:

26.46

Time Frame:

3 Week Hold

EDR has been in a channel pattern over the last few weeks. As it approaches the bottom band, after a some mid-week volatility, look to make enter the trade off the rebound. As noted in KMX, keep a trailing stop loss and close the position quickly should the market turn.

KMX (Carmax)

August 14, 2022

Entry Price:

101.85

Stop Price:

96.45

Target Price:

109.15

Time Frame:

4 Week Hold

KMX, along with most of the market, has been rebounding off June lows. We've seen strong momentum and a crossover of our long-term MAs. Watch for a market pull-back and keep a trailing stop loss. We're riding strong tailwinds, so get in and out quickly

How Apple Pummeled Meta (FB) Shares

Facebook and its parent company Meta Platforms have mostly been made of Teflon when it comes to their stock price. Despite all the negative PR, frequent scandals, and regular Congressional meetings by its CEO, the Facebook stock has been one of the biggest winners over the last 10 years. Building an empire based on social media and our constant desire to be connected, Meta has been arguably the most dominant player in the advertising game for many years. Second to only Google. Now FB is pivoting its operations to focus on the metaverse and the next iteration of the internet. This will end up being a pivotal move for the company which we’ll surely be discussing for years. Shares of Meta are down after dropping 26% following their reporting earnings this week. This marks one of the largest single-day losses in history. The biggest reason for the selloff? It seems that all the new privacy issues being implemented by Apple have made it much harder for Facebook to sell you advertisements


Privacy Catches up to Facebook

Apple has been steadily updating its user privacy controls for years and last April they made even more changes to their iPhone operating system. These changes have made it harder than ever for advertisers to track your activities. This has caused major problems for Facebook's advertising division, their top revenue driver for years. Meta expects the new privacy changes to cost the business over $10B this year, a truly staggering number. These new changes have caused major changes to other social platforms such as Snapchat and Pinterest, though they both look much more attractive than FB at this time.


Advertising Slows

As we noted, these changes have caused ripples throughout the advertising industry, though Amazon, Snapchat, and Pinterest all exceed their advertising estimates when they reported last week. Meta CEO tried to reassure investors That the issues were micro in nature and primarily caused by inflation and supply chain issues. Shareholders were not interested as the stock tanked all week. Analysts across the industry proceeded to slice price targets while downgrading the stock, adding more fire to Facebook’s hot seat.
Bottom line:
Facebook’s core business is changing. Maybe they’re trying to get ahead of the next internet game-changer, or maybe Apple has been forcing them out of the advertising business for years. With the Metaverse still years away, FB shares may trade in the red for the next several quarters

Long-Term Unemployment Dropping

Despite the effects caused by Omicron, long-term unemployment fell significantly in January. This has continued the downward path of peak unemployment, after spiking during the early stages of the pandemic. The number of Americans out of work for at least 6 months dropped by 317,000 in the last month. This brings the total number of long-term unemployment to 1.7M. Long-term unemployment accounts for nearly 26% of the entire unemployed population. This number dropped by nearly 6% last month as well. As the recovery continues to march on, we’ve seen a steady increase of workers getting back into the workforce.

Omicron Surprise

Additionally, the U.S. economy added 467,000 new jobs last month. More positive economic news, though this comes while Omnicron cases continue to surge around the globe. Despite the latest variant wreaking havoc on our hospitals, it hasn’t slowed down job growth or the ability for someone to get back into the workforce. “The Great Rehiring” as it’s been dubbed. Previously, economists were predicting much slower job growth before these reports dropped. Despite the good news, the labor major still hasn't fully recovered from the pandemic yet. While overall unemployment fell by about 2 million during 2021, we still have 570,000 fewer people working than we did in 2020.

Bottom line: While it’s great to see so many people getting back to work, we’re still well below pre-pandemic levels of employment. When assessing job growth, it’s important to review the industries hiring the most people. Many of the sectors that were hit the hardest by the pandemic have also led the recovery in job growth. But these new jobs may simply be bringing back the same ones previously lost.

Upcoming Economic Reports

Market Performance- Week of 08.14.2022

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 08.14.2022

Recent Winners

CF (CF Industries)

CF (CF Industries)

Entry Price:

87.40

August 14, 2022

Price at High:

105.10

Return for Members:

16.84%

Timeline:

4 Week Hold

CF is a manufacturer of fertilizer and other farming products. Similar to our thesis on oil last week, we're expecting more global tensions to arise over the coming months. Although not directly related, CF should appreciate if adverse events occur. Technically speaking, we're seeing a bounce off the 180MA. However, there is negative momentum so be careful with entering too early.

MRNA (Moderna)

MRNA (Moderna)

Entry Price:

168.85

August 7, 2022

Price at High:

197.33

Return for Members:

16.86%

Timeline:

1 Week Hold

We're starting to see a reversal take place. Watching the 50 day moving average cross over the 100 day. Saw some weakness to close this week, so wait for upward momentum before jumping in.

X (US Steel)

X (US Steel)

Entry Price:

20.15

July 31, 2022

Price at High:

23.75

Return for Members:

17.86%

Timeline:

1 Week Hold

Stark momentum shift from the lows on this one. Tracking our moving averages on the 2-hour time chart. Looking for an early entry and quick trade.

Recent Watchlist Winners

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