ACTION PLAN For The Week Of June 19, 2023

 Previous Week’s Newsletter Performance

• Dow Jones- 34,500, as projected in the last mid-week newsletter, crossed as the index touched a high of 34,588.68 on Friday’s session.

• NDX- 15,000, as projected in the last mid-week newsletter, crossed as the index touched a high of 15,284.65.

• SPX- 4,392.12, the projected target in the last mid-week newsletter, reached as the index touched a high of 4,448.47 last week.

• FTSE 100- 7,654.84, the projected target in the last mid-week newsletter, was achieved in Friday’s trading session.

• NFLX- $431.85, as projected in last week’s newsletter, was achieved in the last week.

• CAT- $242.36 projected target reached during the last week.

• ORCL- $113.60, projected target reached as anticipated for the continuation of an uptrend.

• INTC-$34.56, the projected target reached during the last week.

• LEN- as projected for a price correction in the last mid-week newsletter, the price corrected to touch a low of $114.56 on Wednesday’s trading session before resuming the uptrend.

• ADBE- the target toward $500 and more projected when the stock was trading at $478.99 in last Tuesday’s trading session was achieved as the stock touched a high of $518.74 last week.

• KR- the projected target of $47.40 was achieved in last Wednesday’s trading session.

• JBL- projected targets of $103.50 and $105 were achieved as the stock touched a high of $106.50 last week.

Major Highlights from the Global Markets 

Highlights of US Markets

• The major US benchmarks, including the S&P 500 and Nasdaq Composite, ended the week with gains of 2.58% and 3.25%, respectively. Dow Jones, too finished the week on a positive note, rising 1.25%, while Nasdaq 100 closed for the week with a gain of 3.82%.

• The S&P 500 Index witnessed its longest streak of daily gains since November 2021 and its best weekly performance since the end of March.

• The consumer price index increased at a year-over-year pace of 4.0%, down from the prior month's 4.9% and the slowest pace since March 2021.

• Producer prices declined by 0.3% in May, marking four declines over the past six months. Retail sales rose by 0.3% for the month and 1.6% over the past 12 months, the first year-over-year increase since January. Excluding auto and gasoline segments, sales rose by 0.4% in May.

• The University of Michigan's gauge of consumer sentiment reached its highest level in four months.

• The Federal Reserve held the official federal funds’ target rate steady in the 5.00% to 5.25% range. The "dot plot" suggested two more quarter-point rate hikes by the end of the year.

European Markets Highlights

• The STOXX Europe 600 Index closed higher, gaining 1.48% for the week, while Germany’s DAX and France’s CAC 40 gained 2.56% and 2.43%, respectively, for the week.

• The 10-year German government bond yield rose above 2.5% after the European Central Bank (ECB) raised interest rates and signaled further tightening.

• Short-end UK gilt yields surged to their highest levels since 2008, driven by stronger-than-expected UK wage growth in April.

• The ECB raised its key deposit rate to 3.5%, the highest level in 22 years, and indicated that more tightening was likely in July.

• Eurozone industrial production rebounded by 1.0% in April, primarily driven by increased output in capital goods.

• German investor morale improved in June, with the ZEW economic sentiment index rising from -10.7 points to -8.5 points.

• The UK economy expanded by 0.2% in April, following a contraction of 0.3% in March, driven by growth in consumer-facing services, car sales, and education.

• Annual average wage growth in the UK reached 7.2% (excluding bonuses) in the three months through April, and the unemployment rate receded to 3.8%.

  Asian Markets Highlights

• Japanese equities saw gains, with the Nikkei 225 Index rising 4.47% and the TOPIX Index up 3.42% during the week.

• Chinese equities closed higher, with the Shanghai Stock Exchange Composite Index gaining 1.3% and the CSI 300 gaining 3.30% for the week. On the other hand, Hong Kong’s Hang Seng rose 3.35%.

• The Bank of Japan (BoJ) left its ultra-loose monetary policy unchanged, keeping the short-term interest rate at -0.1% and making no changes to its yield curve control (YCC) program.

• The 10-year Japanese government bond yield fell to 0.41%, and the yen weakened against the US dollar, reaching its lowest point in about seven months.

• Chinese stocks surged after the People's Bank of China (PBOC) cut several interest rates, raising hopes for more stimulus. The PBOC reduced the medium-term lending facility rate by 10 basis points and rolled over RMB 237 billion into the banking system.

• China's economic activity weakened, with slower-than-expected growth in industrial output, retail sales, and fixed asset investment in May. New home prices in China's largest cities rose 0.1% in May, slower than April's growth, indicating a slowdown in the property sector's rebound.

• China's lackluster economic data led economists to lower their 2023 growth forecasts, citing slowing export demand, a housing market slump, and weak business and consumer confidence.

  Major News/ Catalyst Events that were Market Movers

  • Nvidia, the AI favorite, rose more than 10% during the week. On the other hand, Microsoft gained 4.76% for the week as the stock touched its ATH of $351.47 after Microsoft announced that it expects its AI business to be the fastest-growing $10 billion business in its history, with AI services contributing 1 percentage point to Azure cloud's projected 26-27% year-over-year growth.

  • Energy stocks underperformed in the week, while the S&P 500 index closed with the strongest weekly performance since March. The energy sector ended the week with a 0.7% decline, making it the only sector out of the 11 S&P 500 sectors to experience weekly losses. Diamondback Energy and EOG Resources were the primary contributors to the energy sector's decline during the week, with drops of approximately 2.68% and 2.44%, respectively.

  • Virgin Galactic's shares opened with a gain of more than 40% in Friday’s trading session following the announcement that the company has scheduled its first commercial space tourism flight for later this month. The flight is set to take place between June 27 and June 30, with plans for a second commercial flight in early August and monthly commercial flights to follow. However, the stock declined after the gap-up opening to close with a gain of 16.50%.

  • Adobe rose to close the week with a gain of above 9% as the company’s released earnings of $3.91 in adjusted EPS for the second fiscal quarter exceeded expectations forecasted at $3.79.

  Bond Market Changes

• The U.S. 10-Year Treasury Yield closed higher at 3.767% for the week, while the U.S. 2-Year Bond Yield ended higher at 4.720%.

   

  Commodity Market Changes

• Gold closed lower for the week at $1,958.13 per ounce, and silver too closed lower at $24.195 per ounce.

• The Crude Oil WTI Futures - Jul 23 (CLN3) closed higher for the week at $71.44.

Technical Analysis of Major Indices

Dow Jones Industrial Average (DJI)

The Dow Jones index touched a high of 34,588.68 and has failed to close above the 34,500 mark. The hourly RSI of around 53 indicates indecisiveness in an hourly timeframe. The index fell on Friday’s trading session to close at 34,299.13. The price may retrace towards the .236 fib level at around 34,116 and take support near the trend line around the 34,000 mark.

NASDAQ 100 (NDX)

The index touched a high of 15,284.65 last week. The daily and weekly RSI at around 74 and 75, respectively, indicates a strong bullish trend. However, the hourly RSI is at 55 as the index declined 0.67% on Friday. The price can retrace towards 14,900-14,868 and find support near the trend line.

S&P 500 (SPX)

The index closed Friday’s trading session at 4,409.60, near the day’s low. The hourly RSI is around 56, and the price may retrace towards the .236 fib level at 4,367.17 to find support near the trend line.

FTSE 100 Index (UK100)

The index declined after touching a high of 7,687.61 to close the day at 7,642.72. The hourly RSI of around 55 indicates indecisiveness. The price may find support near its previous breakout point, which also coincides with the .382 fib level at 7,633.71. However, if the index fails to hold the aforesaid level, then it could head towards the 7,600 mark.

Technical/Fundamental Analysis of Mega Cap Stocks

Eli Lilly and Company (LLY)

The stock has been on a rising trend since last March as it rose from $309. 20 to a recent high of $456.98. The daily and weekly RSI of the stock stands at 63 and 74, respectively, indicating a strong bullish trend. If the price finds support near the trend line around $448-447, then it could resume its uptrend and head toward $465-467.

Procter and Gamble Company (PG)

The stock created a recent low of $141.90 and has risen since then to close at $149.54 on Friday. The hourly RSI is around 55, and the MACD indicator is crossing over on the daily chart, which can make the price head towards $151.92 and $154.64 in the coming days if it manages to sustain above $150 and its 50 DMA.

Technical/Fundamental Analysis of Large Cap Stocks

Elevance Health, Inc. (ELV)

The stock rose from a low of $171.03 in 2020 to touch a high of $549.52 last October. The price has been in correction mode since then, as it has broken the upper trend line and has formed a descending triangle. The daily RSI of around 42 indicates bearishness, which can make the price correct toward $405 and $360 in the coming weeks.

CVS Health Corporation (CVS)

The stock rose from a low of $52.04 in 2020 to touch a high of $111.25 in February 2022. It has been trading currently at $67.72, below its 50-DMA price of $71.21. The daily RSI of around 42 suggests bearishness, which could make the price head towards the .782 fib level at $64.71.

Last Week and Upcoming Geopolitical Events

• 13-15 June 2023-Gavi (the Vaccine Alliance) high-level summit.

• 21-22 June 2023- Ukraine Recovery Conference.

• 21-24 June 2023- Indian Prime Minister Narendra Modi visits the US.

• 22-23 June 2023-Summit for a New Global Financial Pact.

  Upcoming Economic Calendar for the Week

  • Monday, June 19- NAHB Housing Market Index (June).

  • Tuesday, June 20- Fed Bullard Speech, Building Permits Prel (May), Housing Starts (May), and Fed Williams Speech.

  • Wednesday, June 21- MBA 30-Year Mortgage Rate (June/16), Fed Chair Powell Testimony.

  • Thursday, June 22- Fed Mester Speech, API Crude Oil Stock Change (June/16), Initial Jobless Claims (June/17), Chicago Fed National Activity Index (May), and Existing Home Sales (May).

  • Friday, June 23- S&P Global PMI Flash for Composite, Manufacturing, and Services (June).

Companies Reporting Earnings for the Week

Sigma Lithium Corporation (SGML)

Sigma Lithium (NASDAQ: SGML) is expected to report its earnings on Monday, June 19. The company is poised to become one of the world's largest low-cost producers of battery-grade lithium concentrate, positioning itself in the growing electric vehicle (EV) market. Global EV penetration is expected to exceed 60% by the end of this decade, with lithium-ion batteries for EVs projected to triple in gigawatt hours (GWh) between now and the end of the decade.

Despite not generating revenues or profits at present, Sigma Lithium is set to kickstart commercial production in Q3 of 2023. The company has made significant progress, with milestones reached for its Grota do Cirilo project. Phase 1 of the project aims to produce around 37,000 tonnes of lithium carbonate equivalent (LCE), scaling up to a capacity of approximately 104,000 tonnes of LCE by the end of Phase 3.

Sigma Lithium's technology prioritizes environmental sustainability, with a focus on carbon neutrality by 2025. The company employs a purification process without the use of chemicals, and water from the Jequitinhonha River Valley, where the project is based, is treated and recycled.

The institutional interest in the stock remains strong, with the number of institutions owning SGML shares doubling since July 2022. The stock has been in the rising upward channel since January this year and touched its all-time high of $43.18 last week. It is currently trading above its 50 DMA with a daily RSI of around 47, suggesting indecisiveness. The near-term target of the stock can be $45 if it manages to take support near the lower trend line of the channel, around $37.60-$36.50.

FedEx Corporation (FDX)

FedEx Corporation (FDX) is set to release its fiscal Q4 '23 earnings report on Tuesday, June 20, after market close, and analysts anticipate earnings per share (EPS) of $4.89 on revenue of $22.8 billion. This represents a year-over-year decline of -29% in EPS and -7% in revenue. The company's "One FedEx" initiative, announced in early April '23, has attracted investor interest and helped boost the stock from its lows of around $150 in September '22.

The "One FedEx" plan aims to consolidate the company's three operating segments into one, with the first phase involving a realignment of the executive officer structure. The second phase, scheduled to begin on June 1, 2024 (fiscal year '25), will merge the Express, Ground, and Freight divisions under one umbrella. These strategic changes are expected to position FedEx for the post-COVID world and generate benefits for shareholders.

FDX has been implementing a $4 billion cost reduction plan as part of the "FedEx One" initiative, and it is progressing as scheduled, with completion expected by fiscal year-end in May '25. The company will likely benefit from easier year-over-year comparisons starting in the second half of calendar '23, creating a favorable environment for the next 12 months.

Looking ahead to fiscal year '24, analysts project a 24% growth in EPS, driven by cost reductions, while revenue growth is expected to remain flat at around $90.9 billion.

Historically, FDX tends to peak above 1x revenue and reach bottoms between 0.4x and 0.6x revenue. Currently, the stock is trading at the lower end of its price-to-sales range, indicating potential upside. With expected improvements in the economy and decent global economic growth, FDX has the opportunity for at least a 20% upside, especially considering its stronger position after restructuring efforts.

While uncertainties exist, such as the potential for a future recession, FDX is well-positioned to benefit from the normalization of the economy and the growth of e-commerce. The company's focus on cost savings, along with changes in leadership and a leaner cost structure, are expected to drive high-single-digit revenue growth and low double-digit EPS growth in the coming years. Investors are advised to monitor the price-to-sales metric, as FDX tends to be a better sell than a buy when it exceeds 1x to 1.1x revenue. Currently, the price/sales (ttm) ratio stands at 0.65.

Technicals indicate that the stock is on a rising trend after forming a low of $141.92 last September. The stock is currently trading at $233, above its 50-DMA, which stands at $227.05. The RSI on a daily timeframe above 60 indicates bulls are taking charge, and the price may be on its way to $250 and the next golden .618 fib level at $251.91.

La-Z-Boy Incorporated (LZB)

La-Z-Boy, a well-known furniture manufacturer, has a track record of consistent profitability for over two decades and is well-positioned for continued growth. The stock of La-Z-Boy appears undervalued, with a low forward price-to-earnings (PE) ratio of 7.97, compared to its 5-year average at 14.85 and sector median at 15.01. Analysts estimate the earnings per share (EPS) for this year to be $3.18, while a conservative estimate assumes $3.04. The company's net income has grown at an average rate of 14% per year over the past decade.

In terms of cash flow, La-Z-Boy has demonstrated resilience, with positive free cash flow (FCF) even during supply chain challenges. The company's profitability and efficiency metrics, such as net income margin (ttm), have reached all-time highs at 7.03%, indicating strong performance. Compared to its furniture industry peers, La-Z-Boy stands out for its consistent performance. La-Z-Boy's long history and solid financials provide an advantage for investors focused on cash flow.

La-Z-Boy is a compelling investment opportunity with limited downside risk and potential for above-market returns. The acquisition of Joybird, an online sales platform, further enhances its growth prospects. While near-term challenges, such as inflation and an expected revenue decline of 15%, may impact the stock, the next five years are projected to see a growth rate of 7.8% per year. Considering these factors, the outlook for La-Z-Boy seems positive.

The stock is in correction mode after rising from $22.65 to $33.06. The price is currently below its 50-DMA, which stands at $22.89. The daily RSI of around 44 indicates indecisiveness at present. The stock has formed a solid support base near $22. Thus, if the stock does not fall below its recent low at $26.06 and takes support somewhere near its .618 fib level, then it could head towards the $30 mark in the coming days.

Winnebago Industries, Inc. (WGO)

Winnebago Industries, Inc. (WGO) is expected to release its Q3 earnings report on Wednesday, June 21, before the market opens. The RV market, including Winnebago, may benefit from lower fuel prices despite declining travel spending.

Winnebago, a company known for manufacturing and selling recreation vehicles, operates in various segments, including towables and motorhomes. The company has a market capitalization of around $2 billion and trades at a low 6.88, trailing 12-month GAAP price-to-earnings ratio. It also pays a modest 1.7% dividend yield.

In the previous quarter, Winnebago reported better-than-expected results, with earnings per share (EPS) of $1.88, beating the consensus estimate of $1.25. However, its towables segment experienced a significant decline due to softer RV demand. Adjusted EBITDA dropped 41%, and the gross profit margin decreased by 1.7 percentage points.

Winnebago's venture into the electric vehicle (EV) space could serve as a growth catalyst. However, potential risks to consider include higher gasoline prices, reduced consumer spending, and declining RV sales. The consensus earnings estimate for 2023 is $8.00 per share, with a slight decline expected in 2024.

The stock is currently trading at $64.42, above its 50 and 200 DMA. The RSI on a daily timeframe is around 59. If the price manages to cross its last week’s high of $67.33, then it could head toward its next target at $70-70.54, coinciding with the golden. 618 fib level.

Forex Analysis

USDCHF

The forex pair rose from 0.89018 to a high of 0.89495 on Friday. The MACD crossing over and the RSI around 50 in an hourly timeframe indicates the push from buyers from the lower levels. Thus, it can move towards the .382 and .50 fib levels at 0.89607 and 0.89789.

USDJPY

The USDJPY currency pair rose more than 1% on Friday to close at 141.857. The price has managed to successfully sustain above its 50 and 200 DMA, with a daily RSI of around 69. Thus, the bullish momentum can see the price head towards 142.498 and 146.652, the .618 and .782 fib levels in the coming days.

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