TRADE OF THE WEEK - MRNA

Major Highlights from the Global Markets 

Highlights of US Markets

• The US indices closed lower on Tuesday, with Dow Jones down by 0.69% to close at 33,055.52. On the other hand, S&P 500 was down by 1.12% and closed at 4,145.57, whereas NASDAQ 100 declined by 1.28% to close at 13,672.54.

• Stocks like Moderna Inc.(MRNA) was the top performer on S&P 500, which rose by 8.69% to close at $137.75 on Tuesday, whereas stocks like Las Vegas Sands Corp(LVS) and Universal Health Services Inc (UHS) were among the worst performers witnessing a decline by 6.35% and 6.14%, respectively to close at $55.71 and $126.93. 

• The markets have been facing volatility as policymakers are yet to arrive at a debt ceiling deal with only less than two weeks left until the default. As a result, the CBOE Volatility Index (VIX) was up on Tuesday by 7.67% at 18.53.

European Markets Highlights

• The pan-European STOXX 600 declined 0.60% on Tuesday, while Germany’s DAX and France’s CAC 40 declined 0.44% and 1.33%, respectively.
  

  Asian Markets Highlights

• Japan’s main indices, Nikkei 225 and TOPIX, declined 0.42% and 0.66%, respectively.

• China’s market ended lower, with the Shanghai Stock Exchange Composite Index declining 1.52%, whereas the blue-chip index CSI 300 declined 1.41% on Tuesday. Hong Kong’s Hang Seng lost 1.25% for the day.

  Bond Market Changes

• The U.S. 10-Year Treasury yield closed at 3.696% on Tuesday, while the U.S. 2-Year Treasury yield closed at 4.327%. The bond market is experiencing volatility amid the U.S. debt-ceiling standoff.

  Commodity Market Changes

• Gold closed on Tuesday at $1,975.24 per ounce, and silver closed lower at $23.442 per ounce for the day.

• The Crude Oil WTI Futures - Jul 23 (CLN3) closed higher on Tuesday at $72.91.

Technical Analysis of Major Indices

Dow Jones Industrial Average (DJI)

The Dow Jones index has been experiencing volatility amid the debt ceiling impasse. The hourly RSI at 33.37 with descending triangle formation indicates selling pressure in the index. However, the index had found support around the 33,000 level on the previous two occasions and closed at 33,055.52 on Tuesday. The break of the 33,000 level can allow the price to fill the gap of Mar 31,2023 to 32,850 with the next crucial support at 33,500, which coincides with the golden .618 retracement ratio of the previous uptrend from 31,400-34,300.

NASDAQ 100 (NDX)

The index, which has been in a rising trend, is facing correction amid the debt ceiling worries, and its hourly RSI, presently around 40, indicates that any further selling can make the index head toward its 0.236 retracement ratio of its previous uptrend from 11,700-13,900, which also coincides with the trendline support.

S&P 500 (SPX)

The index has been facing selling pressure around the 4,200 mark and has failed to sustain above it. Tuesday’s selling brought the index down by 1.12% to close at 4,145.57 with an hourly RSI of around 35. The rising volatility in recent times can see the index to be trading in the zone of 4,050-4,200 in the coming days.

FTSE 100 Index (UK100)

The index was on a rising trend from mid-March to April end, but it has been trading in the narrow range of 7,700-7,800 since May 2nd. A decisive move can be seen when the index breaks on either side.

Last Week and Upcoming Geopolitical Events

• 18 May 2023- Deadline for Black Sea Grain Initiative (BSGI).

• 19-23 May 2023- G7 Leaders' Summit.

• 24 May 2023-Quadrilateral Dialogue (Quad) Leaders’ Summit.

• 25 May 2023-Third anniversary of the killing of George Floyd.

• 28 May 2023-Local and regional elections in Spain.

  Upcoming Economic Calendar for the Week

  • Wednesday, May 24- MBA Mortgage Market and Refinance Index, 5-year note auction, FOMC minutes, and EIA Crude Oil Imports Change.

  • Thursday, May 25- GDP Price Index QoQ 2nd Est, GDP growth rate QoQ 2nd Est, Initial Jobless Claims, 4-week, 8-week bill, and 7-year note auctions.

  • Friday, May 26- Personal Spending MoM, PCE Price Index YoY and MoM, Michigan Inflation Expectations Final, and Baker Hughes oil rig count.

Companies Reporting Earnings for the Remaining Week

NVIDIA Corporation (NVDA)

The company is set to release its Q1 earnings for FY2024 on May 24, Wednesday, after the market close. The high valuation seems to be a concern, and it is expected that its revenue will drop by 21% and net income will fall by more than 8% YoY to $1.48 billion or $0.93 per share. However, its data center business segment can grow by 3% to $3.88 billion. The stock is trading at a P/E (TTM) of 179 times against its 5-year average of 65 times, which could cap its upside move.

The stock has grown over 115% from the start of this year, from $138 to $320. If the earnings fall below the estimates, then the stock could be heading toward a correction of its previous uptrend, which can make the stock fall to $275 and $250 levels, coinciding with .236 and .382 Fibonacci retracements of the prior uptrend.

 
Costco Wholesale Corporation (COST)

The Washington-based company is set to release its fiscal Q3 results after the market close on May 25, Thursday. The consensus revenue estimate is $54.66 billion, and the EPS estimate is $3.32, an increase of 4.73% YoY. The company’s management is continuing to focus on offering lower prices even though costs have risen amid the inflationary environment. It presently has 851 warehouses, with 585 of them in the US and Puerto Rico, allowing sufficient room for growth compared to Walmart, which has 4,634 stores in the US.

The company has sufficient cash, which currently stands at around $14 billion compared to just $9 billion in debt. The forward P/E stands at 34.25, and analysts expect its earnings to grow at a 10-12% rate for the next seven years.

The stock has formed a symmetrical triangle on a daily timeframe indicating the contraction in the price range. The uptrend from $306 to $615 saw a correction till the golden retracement ratio of .618 at $424 last May, and after that, the price has remained volatile. The daily RSI stands below 40, and the contraction of the price range can result in significant price movement on either side, depending upon the upcoming quarterly earnings.

Medtronic PLC (MDT)

The medical device company is set to report its earnings for Q4 and the full year 2023 on May 25 before the market opens. The consensus annual revenue estimate stands at $30.9 billion. The company uses AI models in gastroenterology and spine surgery areas and is ranked among the top 5 companies in the AI healthcare sector by GlobalData. The rising inflation and spending on R&D can put pressure on its earnings in the near term, in addition to the currency exchanges, which is affecting its EPS. Moreover, the company has a 75% three-year median dividend payout ratio and is known as a dividend growth stock. The company also won 150-plus product clearances over the last year. Its forward P/E stands at 16.98 and EV/EBITDA at 15.70.

The stock managed to cross above its 200 DMA in the last month for the first time since April 2021. Moreover, it was trading in the range of $76-88 for the past six months from October 2022 and managed to break out of the range to touch a recent high of $92. Therefore, if the price manages to find support around $85-84 with 50 DMA and 200 DMA also hovering around the same levels, then it would set the tone for the future upside movement.

Analysis of Crypto Mining Companies

Marathon Digital Holdings, Inc. (MARA)

The stock has been trading in the range of $8.50-10.75 for more than a month. A decisive move can be seen when the price breaks on either side, as it has been facing selling pressure around the resistance level but buying, too, emerging from the support level. The upside level can be $12.25, whereas, on the downside, the next support levels are $7.60 and $6.85.

Riot Platforms, Inc. (RIOT)

The stock has been trading in a wider range of $10.15-13.00 for over a month now. The hourly RSI of around 44 suggests no directional bias. The upside levels above the range can be $13.95-14.00, whereas, on the downside, the levels below the range are $8.85 and $7.50, which coincides with the retracement ratios of .50 and .618 of the previous uptrend from $3.25 to $14.43.

Block Inc. (SQ)

The stock was trading downwards from the beginning of February this year, and after finding support around $55 this month, it has risen to close at $61.56 on Tuesday after a momentum of around 5% in the past two trading sessions. It is presently near its descending trendline, which also coincides with the .236 retracement ratio of the previous downtrend and also with its 50 DMA. If the price manages to cross the trendline, then it can head toward its next levels of $68 and $72.50.

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