November 3, 2020
Stocks – PYPL, SQ, DOCU, ZM
Macro – EWG, SPY
- Stocks Give Back Gains
- Betting On Rising Vol
- Monster Themes To Watch For Week of 11.2.20
- De-Risking Friday
- Big Options Bets Going On
- MCM Thematic Growth 3Q’20 Investor Letter
- Are Yields Going To Explode Higher?
- Double Top Alert -Midday
Stocks are rising to start the day on November 3, with the SPY ETF up 1.15% and the NASDAQ 100 ETF up around 50 bps. The strength seems to be coming out of Europe, with the German DAX index up nearly 1.8%. But it seems that the DAX is merely filling a gap from last week, rising to around 12,000. Now that the gap is filled, it should revert to the previous lower trend.
This price action suggests the rally we have seen the last two days appears to be more of a bounce instead of the start of a rally.
At this point, the S&P 500 (SPY) is rising above $332, which serves as resistance, and is now starting the refilling process of a gap from October 27. We will have to see if the entire gap gets filled or not, but at this point, a move up to $338 would not seem unreasonable. If that is the case, then we should expect that the S&P 500 to then reverse and begin to follow its previous trend, which is lower.
PayPal is trading lower today after providing earnings guidance that came in below consensus, and that is never a good sign for a stock that trades with a big multiple. It usually results in a lower stock price, which is exactly what is happening with shares falling about 5%. As long as it stays above $172, it should be fine. If it falls below $172, then real problems start because a decline below $165 confirms a double top pattern, which will lead to a drawdown in the shares.
Square is falling a little following PayPal’s results and will report later this week. The stock has managed to hold on to support at $150. A break below $150 sets up a drop to around $133.
DocuSign continues to trend lower with key support at $188. I still think this one is heading even lower and will break support at $188.
Finally, Zoom has been in decline as well, with the stock likely to continue to trend lower towards $408.
Have a good day
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.