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Weekly Newsletter- Week of 2.27.2022

Stocks Cause Whiplash Before Notching Gains

Stocks were climbing higher on Friday after another highly volatile week for the stock market. As Russia continues to go on the offensive against Ukraine, investors have been cautiously watching and assessing the economic impacts of Russia's invasion of Ukraine. At one point this week, the Vix volatility index spiked upwards of 30% before pulling back to more reasonable levels. But despite the rising concerns of political unrest, Thursday actually represented the best day for the market since 2020 as investors weighed the latest news from Russia.

Erasing the Losses

As we just noted, Thursday was a massive day for the entire market. If you still had money in the market, you almost certainly were in the green after a very positive session across the board. After a see-saw day of trading, Thursday saw early losses make way to huge gains. Thursday alone, the Dow erased an 800- point hole to end the day pushing higher. Many charts have indicated that several sectors of the market have been trading in ‘oversold’ category for the last two weeks. This has many analysts wondering if equities have been overreacting to the Ukrainian crisis as of late.

Despite the late surge in trading this week, the Dow posted its third-straight losing week. However, both the S&P and Nasdaq were able to notch winning weeks. Jumping 0.8% and 1.1% respectively. The S&P also received a significant boost from Etsy this week, after the eCommerce platform reported strong earnings. Shares of the unique online retailer jumped nearly 20% this week after strong reporting. This seems to have shaken off fears that Etsy’s greatest growth period is behind them.

Increasing Market Sentiment Despite Uncertainty?

Market sentiment received an additional boost on Friday that helped fuel the surge in stocks. On Friday, the Kremlin reported that Russian President Vladimir might be ready to send a delegation to begin negotiations with Ukraine. All despite Russian forces continuously pressing closer to the Ukrainian capital city of Kyiv. The market rally also comes at a time when President Biden has recently announced it would be enacting a new slew of sanctions against Russia. The move follows similar sanctions announced by the United Kingdom and the European Union. The new sanctions from the U.S. include a targeted effort to isolate Russia from the rest of the global economy. Despite all the chaos happening on the grounds, the market seems to be reacting positively to the clarity provided by the increase in economic sanctions.

What’s It Mean: It's no surprise that the greatest threat to global peace since World War II has been the biggest driver of market sentiment as of late. But despite all the fighting happening in Ukraine, investors must take a more focused approach to what this war could mean on stocks and the U.S. economy. Investors may have gotten whiplash this week after seeing huge losses quickly turned to surging gains for stocks. When assessing potential buying opportunities in the current climate, it's important to identify if a stock that you’re tracking has already moved into oversold territories. Additionally, a good investor should take the time to gain a clear understanding of what sectors of the market could be impacted the most if economic sanctions continue to be placed on Russia.

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

CashApp's Resurgence

FinTechs have been taking a beating over the last several months as the broader market has rotated out of high multiple growth and technology stock. As an example, Square / Block, PayPal are down over 50% in the last 6 months, while SoFi is down nearly 30% in the same timeframe. Block has frequently made our newsletter as Jack Dorsey; their outspoken CEO and former Twitter exec have continuously discussed his plans to pivot Block's priorities into crypto mining and crypto tech. This week, Block reported earnings that comfortably beat all estimates. The stock exploded nearly 30% on Friday alone to close out a big week after months of losses.

Block Beats Earnings

CashApp added another 4 million users during the last quarter, bringing their total to 44M unique users. For comparison, PayPal has nearly 400M users, but this still represented significant gains for Block. Coming into earnings, investors have been concerned that government-fueled stimulus checks were the main driver for CashApp's growth over the last year. It now appears CashApp users have outlasted their stimulus-fueled growth, as user engagement saw a nearly 15% gain as well. Revenue was also strong for Block, as Earnings-Per-Share and quarterly revenue both topped estimates. Block CFO also expects yearly growth of nearly 35% as well, which adds to Square's positive outlook. CashApp revenue also saw a huge jump of nearly 60% fueled by "CashApp transaction for digital currency Bitcoin".

Afterpay Acquisition

Though many details over its recent acquisition of Afterpay were kept vague, Block leadership did inform investors “of the significant synergies realized through the acquisition of Afterpay. This will enable Square to serve customers with large global merchants”. The move is seen as another in a strong line of acquisitions aimed to enhance the buyer/seller experience. Though there are obvious upfront costs, the acquisition should also look to improve Block's bottom-line in the long term.

What’s it Mean: Owning high-multiple growth stocks that account for ‘future revenue’ can always be a potentially risky investment. But owning shares of high-quality companies for the long term can be the basis for a strong portfolio. Block achieved monumental gains during the early stages of the pandemic, but shares have been selling off for months over concerns on an inflated evaluation. Even as shares plummeted, the underlying business for Block has remained strong. After taking losses and reestablishing a more reasonable valuation, it appears 2022 should be another strong year for this increasingly reliable FinTech.

Ukraine Receives Crypto Donation Worth $4M

For crypto investors who are extremely bullish on Bitcoin, the ever-increasing number of crypto use cases has always helped fuel positive sentiment. This week, crypto saw another new use case as the Ukrainian government received nearly $4M in crypto donations as a way to help repel Russian forces. The Ethereum wallet listed by the Ukrainian government has been receiving millions of donations from crypto investors as Russian forces have begun to invade their homeland. The hope is these additional crypto funds may help Ukraine defend itself further from an invading Russia. As the crypto landscape continues to advance, we have no doubt additional use cases for crypto and Bitcoin will continue to be discovered. Thus, adding to the long-term bullish case for crypto.

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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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