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The Monster Week Ahead: Watching – The VIX, Nvidia, Micron, Tesla & Biotech
We could see a much more relaxed market than the one we saw last week. With Tax Reform now through the Senate, the odds seem fairly good that reconciliation can produce a tax bill to be signed by the President by year-end. That should give stocks the confidence it needs to avoid any sharp declines. Stock like Nvidia, Micron, Tesla, and the biotech sector could be in focus.
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In terms of the political headline risk, that seem to always exist. But the original headlines that brought stocks lower on Friday seemed to have changed Friday night with a correction issued. The political websites can address the matter; I have to make mention of it because the S&P 500 did fall by nearly 1.7 percent from to peak to trough at one point. But stocks should feel calmer regarding this matter as well.
The Russell 2000 ETF ($IWM) was actually down by nearly 3 percent at the trough. Was the news a big deal? Yes.
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There was a positive that came out of Friday’s disaster, that we learned the market has a substantial underlying bid it, one that merely likes to buy the dips. There will be a day when buy the dip becomes, sell it more aggressively. It will come.
Additionally, the VIX index shows just how concerned the market was by the end of the day on Friday, which was no concern. Because by the close, the VIX was back to where to it started the day near 11.40, despite rising to nearly 14.25 intraday.
The chipmakers were decimated during the week, with the PHLX Semiconductor ETF ($SOXX) down by nearly 6 percent, and stocks like Micron ($MU) down 15.5 percent, Lam Research ($LRCX) down almost 13.5 percent, and Nvidia ($NVDA) down by nearly 8.9 percent.
How this group trades to start this week should be of particular interest. The group began getting some upward momentum towards the end of the day Friday, and it will be essential to see the sector continue that positive energy higher.
The best way to know if a bottom had been reached in this group would be a lower open, retesting the lows from Friday, and than a surge higher into the end of the day Monday. It would serve as confirmation of the lows reached on Friday, and that a bottom was put in place.
For Micron it would mean retesting the lows around $40.50 and a rally taking shares above $42.
For Nvidia, it means retesting a price below $194, and close above and close above $201.
Closing above $202 is very critical for Nvidia because shares of Nvidia have found themselves back in the rising wedge pattern it had been for most of 2017. As the 5-minute chart shows above, the stock was unable to break out and rise above $202, and the upper resistance trend line of the wedge. This week for Nvidia is beyond crucial.
It is a flip-flop from last week, because last week, we noted how stocks like Visa ($V) and Nvidia, were likely to lead the market higher heading into year-end. But like most investors and traders, the action and event of trading starting on Wednesday through the close on Friday blindsided me as well as many others. Which tell us that charts are great in the absence of news flow, but new News also trumps charts, and when the market has to reset, it will reset. So I reset, like or leave it.
Tesla shares held up very well last week despite the volatility all over the marketplace. In fact, just look at the chart below and how the stock just stopped going down between $303 and $308. That level has been stable for Tesla since the quarterly results in mid-November.
If the stock can continue to hold this level and the broader market can regain its footing, I think Tesla could be set for a year-end rally. But I what do I know, I am likely the most bullish person on Tesla for 2018 on Wall Street, even MarketWatch noted my bullish stance, in their call of the day.
If you want to know where Biotech is heading this week, watch Biogen and Celgene. Biogen shares broke-out last week and retested that breakout at the end of the week. The stock could be looking to fill the gap, next week.
While Celgene also retested its breakout.
A good week for Biotech could mean a good week for stocks and the market.
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Michael Kramer and the Clients of Mott Capital own shares of Tesla, Celgene
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.
© 2017 Mott Capital Management, LLC. Use, publication or reproduction in any media prohibited without the permission of the copyright holder.
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