ACTION PLAN for the week of May 15, 2023

Major highlights from the Global Markets

Xclusive Trading
May 14, 2023

Major Highlights from the Global Markets

US Markets

The major indexes, such as Dow Jones Industrial Average and S&P 500, ended mixed for the week as investors weighed inflation data. However, the tech-heavy index Nasdaq Composite outperformed as one of its key constituents, i.e., Google parent Alphabet surged more than 10% during the week following the unveiling of new artificial intelligence for its search platform. On the other hand, the financial stocks underperformed, led by PacWest Bancorp, which reported a 9.5% fall in its deposits, reviving concerns about the regional banks.
The CPI rose by 4.9% in April year-on-year, less than the expected 5% increase, raising hopes among investors that the Fed’s interest rate hike may be coming to an end.
The U.S. dollar rose against the sterling and euro on Friday as the dollar index notched its biggest weekly gain of 1.4% since February to close at 102.71 as investors shifted to safe havens amid the concerns over the U.S. debt ceilings and monetary policy.

European Markets

The Bank of England (BoE) raised its key interest rates by 25 basis points from 4.25% to 4.5% for the 12th consecutive time, with updated projections for inflation cooling at 5.1% by the year-end instead of its earlier projection of 3.9% in February.
The UK economy grew 0.1% in its first quarter, and BoE revived its forecast for the second quarter, projecting zero growth instead of a 0.7% contraction.
Germany’s industrial output slumped 10.7% in March sequentially on a seasonally and calendar-adjusted basis, posting the largest month-on-month decline since COVID-19 Pandemic in 2020.
The stock indexes ended mixed, with UK’s FTSE 100 declining 0.31%, while France’s CAC 40 and Germany’s DAX slipped 0.24% and 0.30%, respectively.
Asian Markets
The corporate earnings’ growth signs supported Japan’s stock market, with Nikkei 225 rising 0.8%, while the released data showed sluggish wage growth during March.
The Shanghai Stock Exchange Index gave up1.86%, and Hong Kong’s Hang Seng declined 2.11%.
China’s consumer price index (CPI) rose 0.1% in April year-on-year, cooling from a 0.7% annual gain in March, and the producer price index (PPI) was down 3.6% year-on-year for the seventh consecutive month. Its exports rose 8.5% in April year-on-year but eased from 14.8% growth in March.

Major News/ Catalyst Events that were Market Movers

Occidental Petroleum Corp, the oil and gas producer, fell 4.28% in the past week due to its first quarter’s earnings falling short of the estimates with a 48% decline YoY to $1.1 billion.
Livent Corp rose around 10% in the past week following the news of Allkem Ltd, the Australian lithium miner, agreeing to merge with the U.S. chemical manufacturing firm in a $10.6 billion deal.
Airbnb Inc. declined 12.2% during the past week as the company forecasted fewer bookings, followed by lower average daily rates in the second quarter.
Rivian Automotive Inc. jumped 1.80% after its first-quarter earnings beat the estimates. However, it has been on a falling spree since then, with the shares falling 6.72% on Friday as investors appear to be nervous about its bold bet of not cutting its prices to compete with its key rivals such as Ford Motor Company and Tesla as it feels the demand for its electric vehicles is so strong and is forecasting to produce 50,000 EVs this year.
Walt Disney fell 8.73% on Thursday as it revealed that its subscribers have dropped by another 4 million in the second quarter, even though its quarterly earnings aligned with the market’s expectations.
Paypal Holdings Inc. sank 17.71% during the past week following the release of its Q1 numbers last Monday. Though it reported solid results, beating estimates, its projection of lower operating margin expansion from a previously expected 125 basis points to 100 basis points increase this year has made analysts lower their price targets for Paypal.
Bond Market Changes
The U.S. 10-Year Treasury closed at 3.463%, while the U.S. 2-Year Treasury at 3.991%. The bond market is experiencing volatility amid the U.S. debt-ceiling standoff.
Commodity Market Changes
Gold closed lower for the week at $2,010.88 per ounce amid the rising dollar and higher 10-year treasury yields making bullion less attractive.
Silver, too, fell about 6.55% during the week to close at $23.971 per ounce.
The oil prices, too, settled lower with Crude Oil WTI Futures - Jun 23, closing 1.82% down for the week at $70.04.

Technical/Fundamental Analysis of Mega Cap Stocks

Alphabet Inc. (GOOGL)

GOOGL stock showed strong bullish momentum breaking its immediate resistance of $110 last week, fueled by the unveiling news of new artificial intelligence for its search platform. The weekly RSI of around 63, and the daily RSI of around 75, suggest the stock is in strong bullish momentum and approaching its near-term target of $122-123.

Tesla, Inc. (TSLA)

Tesla is recalling around 1.1 million vehicles in China to fix the accelerator pedal problem to allow drivers to have more control over the regenerative braking system.

The share price has been consolidating between $150-$220 after the up move during the year’s first two months. In addition, the stock has been presently trading below its 50 DMA with its daily RSI around 46, suggesting more consolidation ahead.

Amazon.com, Inc. (AMZN)

Amazon stated on Saturday that it had optimized its delivery network, which will enable it to reduce delivery times and reshape its inventory management system and search capabilities, ultimately leading to products being delivered with 12% fewer touchpoints.

The share has been trading in the range of $115-90 after the up move in January 2023. Further, the daily RSI above 60 and the price presently trading above 50 DMA at $110.26 indicates initial strength, but the price may spend some more time consolidating before resuming any move again.

Last Week and Upcoming Geopolitical Events

9-11 May 2023- The 42nd ASEAN Leaders’ Summit.
11-13 May 2023- G7 Finance Ministers’ and Central Bank Governors’ Meeting.
13 May 2023- EU Indo-Pacific Ministerial Forum.
14 May 2023- Turkey and Thailand.
18 May 2023- Deadline for Black Sea Grain Initiative (BSGI).
19-23 May 2023- G7 Leaders' Summit.
Upcoming Economic Calendar for the Week
- Tuesday, May 16- U.S. Retail Sales, Industrial production, and manufacturing production.
- Wednesday, May 17- Housing starts.
- Thursday, May 18- Initial jobless claims, existing home sales, and U.S. leading economic indicators.
- Friday, May 19- Fed Chairman Powell and former Fed Chairman Bernanke on the panel.

Companies Reporting Earnings for the Upcoming Week

Walmart Inc.

Walmart Inc. is set to release its Q1 earnings before the market opens on Thursday, May 18. Its discount pricing model seems to benefit the company in the weaker consumer spending environment.

The stock has risen around 8% year-to-date. The immediate resistance is at $155 and presently trading above its 50 DMA, 5% away from its all-time high of $160.77. Moreover, the Deutsche Bank has maintained a bullish call while projecting its same-store sales growth to be 6%, up from a prior estimate of 5.5%. Its Fitch rating stands at AA as of Dec 2022.

Home Depot Inc.

Home Depot is set to announce its first-quarter results before the opening bell on coming Tuesday. Wall Street sees its earnings at $3.81 per share, declining 6.8% from EPS of $4.09 YoY due to rising operating expenses and higher cost burdens.

The share has failed to sustain above its 50 DMA after crossing it in the previous three attempts and has been facing resistance near the descending trendline. Its Fitch rating stands at A as of April 2023. The stock will be under selling pressure until and unless it crosses and sustains above $300 with strong momentum.

Bitcoin/ Ethereum Analysis

Bitcoin has been consolidating between $15,000-$30,000 for around a year now after the falling spree and presently trading below its 50 DMA. Further, the daily RSI below 40 suggests that it is currently lacking strength.

Ethereum, similar to bitcoin, has been consolidating in the range of $1000-$2000 after the falling spree and presently trading below the 50 DMA. The daily RSI of around 42 suggests the coin is currently lacking strength.

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