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Amazon, Apple, Microsoft, Netflix May Fall, Tesla & Broadcom May Rise
It will be a shortened trading week for the stock market, with the President day holiday, but it should be anything but slow. The S&P 500 has rallied by 200 points since bottoming on Friday, February 9, a rise of 8 percent. But we could see the rally pause this week and take a bit of breather.
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The 5-minute chart shows how the S&P 500 stalled at the end of the day on Friday, options expiration, and was unable to close at the highs of the day, with resistance at 2,742 proving to be too strong. It would suggest the S&P 500 is set to fall slightly, at least at the start of the week to roughly 2,690, a decline of approximately 1.5 percent. Should 2,690 hold, which is my expectation, a rise higher would continue from that point.
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Amazon
Amazon is likely not finished falling and could retest its 200-day moving average again around $1,300, in the not too distant future. We can see that in the chart the relative strength index has now been trending lower, despite the stock moving higher, a bearish divergence. Additionally, the recent price rise higher came on declining amounts of volume, which would suggest that buyers do not have the same level of conviction as the previous surge higher.
Additionally, the stock failed at resistance at $1,470 and the previous trend higher also acted as a resistance level. Again more bearish indications.
If that wasn’t enough, the stock is trading at peak valuations on a historical basis as well. As noted in an Investopedia article I wrote during the week, each time the stock has risen above 2.4 times one-year forward sales it has seen its stock decline.
Microsoft
Microsoft is not all that different than Amazon, with an RSI that is also trending lower, despite a rising stock price. The stock looks set to decline to roughly $85.50, where it should find a meaningful support level.
Apple
Apple like the others is exhibiting the same patterns, with an RSI trending the wrong way. The best case scenario is for Apple to test that lower uptrend again, which is now around $160.
Netflix
Netflix is no different, with a divergent RSI, and waning volume levels each day following the lows. It likely indicates shares could be set to fall, perhaps to around $250.
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Tesla
Tesla shares could look to continue to rise, and unlike the other stocks, it has an RSI that is trending higher, and again was able to test the $290 -$300 support level. The stock has been able to rise above the multi-month downtrend as well, another positive. Tesla never got to the extreme overbought levels either.
Tesla, unlike Amazon, is also trading at a historical discount on a one-year price to forward sales ratio. The last time Tesla was trading a ratio this low came two-years ago in February of 2016 when it was trading at 1.77 times one-year forward sales estimate. Now it trades at only 1.97 times forward 2019 forward sales estimates of $26.51 billion
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Broadcom
With the odds of Broadcom acquiring Qualcomm continuing to dimish, the stock is starting to reflect life without Qualcomm. With that, the stock has found a meaningful bounce off of support at $227, and the RSI has broken out of a multi-month downtrend. A breakout would come if the stock rose above $260.
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Shares are also historically cheap trading at less than 12 times one year forward earnings estimates of $15.30. The company issued strong guidance in just two weeks ago.
Qualcomm
If the Qualcomm/Broadcom deal is dead, then Qualcomm has no right trading at $65, and likely reverts to the low $50’s. The company still has an on-going litigation with Apple, while analysts are looking for earnings to decline by nearly 20 percent in 2018 to $3.46, while revenue is expected to drop almost 5 percent to $22.2 billion.
In fact, the company is not expected to see revenue growth for some time.
QCOM Revenue (TTM) data by YCharts
That is it for today. Good Luck
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Michael Kramer and the clients of Mott Capital own shares of NFLX and TSLA
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Tags:#amazon #netflix #apple #qualcomm #broadcom #microsoft #sp500 #fall #rise #tesla
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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