Tech Bounces After FEDs Latest Sentiment

Jan 30, 2022 | Risk-on for many traders- how to play the coming volatility

Weekly Newsletter- Week of 1.30.2022

Tech Shows a Pulse After Another Volatile Week

A Friday rally pushed stocks green after yet another volatile week of trading. A surge in Technology stocks had the Nasdaq up over 3% on the day. The DOW also jumped nearly 2% while posting its best day since December 6th. The S&P also had a record day while recording its largest gains in nearly two years.

Tech Stocks Finally Show Life

For the first time in weeks, technology stocks finally found support as the tech rally mounted. The technology sector was anchored by Apple this week, whose shares exploded over 7% on Friday after posting their single largest quarter for revenue and sales. Apple posted its historical quarter of sales despite continued supply chain issues caused by the pandemic. Big tech carried the sector on Friday as Microsoft, Amazon, Meta & Alphabet all closed higher on Friday. Despite being beaten down earlier in the week, each found support before trading upwards.

Volatility Continues to Reign

The VIX volatility index dropped nearly 10% on Friday, despite still trading at inflated levels. The market’s Fear Gauge shot up to its highest level since October 2020 while trading above 30 this week. Major indexes experienced large swings each day this week, with the DOW making up nearly 1,000 intraday points in a wild day of trading last Monday. This helped the DOW break a three-week-long losing streak. Huge intraday swings have become a staple of the markets as of late, which financial conditions and the FED tightening their policies. The market has continued to any news as more economic data becomes available. This continues a frustrating tug of war between bears and bulls that have helped support high levels of volatility. As we turn the calendar to February, the S&P is down 7% this month marking the Index's worst month since March of 2020.

Fed Feeds Fear

This week, the Fed Committee noted it would likely be raising interest rates. This comes as part of a broader shift and tightening of monetary policy. The market is now preparing for five quarter-percentage-point interest rates hikes in 2022. What it Means: The markets have been approaching historical levels as of late as many of the key indexes have been heavily oversold. Last week, we began to see support and resistant lines forming after a brutal “correction” into bear market territory. Going forward, the outlook for 2022 remains the same. With interest hikes forthcoming, we will need to continue to look outside of simply technology for weekly gains.

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Tesla's Robots

Tesla reported earnings this week, and the EV maker noted their previously unveiled humanoid Optimus robot could be in production by the end of the year. Dubbed “The Tesla Bot”, Musk called the latest Tesla innovation the most important product they would release this year. Musk proclaimed the robot “has the potential to be more significant than the vehicle business.”

Musk then went on to proclaim that robots could help resolve future labor shortage issues while noting labor is still the foundation of the economy. The automotive industry has been furthering the use of robotics within manufacturing for the last several years. Though this trend may have started as early as the 1970s when car production lines began to invest heavily into robotic arms, which would go on to displace human labor. Though process robotics have been expanding into other sectors as of late as well. PwC estimates nearly 1/3 of all human jobs will be lost to automation by 2030.

Robot Use Cases

Musk cited Optimus’ first job would likely be inside the Tesla factories “moving parts around the factory, or something like that” he pronounced. Tesla has only revealed prototypes of their new robot which have hinted that the machine will be built to look like an average-sized human. A humanoid robot must be better suited for the service economy, but Musk thinks Tesla has a different robotic solution for taxis, one of the service economy’s largest sectors: Tesla expects to capitalize on its Full Self-Driving features to convert idle vehicles into on-demand taxi fleets. Forgetting the value of Optimus, Musk believes “Full Self-Driving” will become the most important source of profit for Tesla.
Bottom Line: Whether it’s in labor or automobiles, Tesla is investing big in the future of robots. Musk thinks the future of his company will depend on its ability to automate manual processes and increase production quickly.

Rare Loss for Facebook (Meta) as they Shutter Crypto Plans

This week, we learned Meta Platforms (parent company to Facebook) would be waving the white flag and pulling the plug on their yet-to-launch cryptocurrency project. This move comes amid growing concerns from regulators. Facebook began exploring opportunities to create its own stable coin as early as 2019. At the time, the coin was known as Libra before rebranding as Diem. Meta recently launched a crypto wallet which once again caused more backlash for the controversial tech company.

Now, it appears meta will be formally shuttered any work on cryptocurrencies. The cryptocurrency has been heavily pushed by Facebook, but it’s actually a project of “The Diem Association”, a non-profit organization. With that said, Meta has been a key contributing partner while playing a massive role in the project. It’s clear Meta was set to benefit heavily from the rollout of the crypto asset. It now appears that due to mounting regulatory resistance, the Diem Association will have to liquidate all assets in order to return capital to investors. This includes Zuckerburg and the Meta Platforms team. A rare loss for the Facebook parent company.

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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