US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a positive note and continued the momentum for most of the week. The index made a high of 2764.37 during the week and settled at 2735.66 with a week-to-date (WTD) gain of ~2.84 percent on December 09, 2021. Other major indices such as S&P 500 and NASDAQ Composite also showed bullish movement for the week. On December 09, 2021, the S&P 500 index settled at 4667.45 with a WTD gain of ~2.84 percent, while NASDAQ Composite Index settled at 15517.37 with a WTD gain of ~2.86 percent.

Market sentiments were boosted by a further decline in US weekly initial jobless claims numbers. As per the US Department of Labor, weekly initial jobless claims numbers decreased to 184,000 and registered the lowest level since September 06, 1969.

Having understood the US market performance over the week, taking cues from major global news, and based on our technical analysis of the Russell 3000 index for the upcoming week, now let us have a look at the two NYSE/ NASDAQ listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Stanley Black & Decker Inc (NYSE: SWK) and Ternium S.A. (NYSE: TX) for the next 2-4 weeks duration:

Stanley Black & Decker Inc 

Stanley Black & Decker Inc (NYSE: SWK) is a global machinery company that operates in three segments; Tools & Storage, Security, and Industrial.  Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

SWK has been sustaining above a downward sloping trend line breakout level for the past 1 month, indicating the possibility of a positive movement in the stock. The recent upside movement in the stock is backed by increasing volumes, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 225 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 225 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart RSI (14-period) is trading at 51.72 levels, indicating a positive trend for the stock. The weekly volumes also seem supportive of the upside movement. The CMP is above the 21-period SMA and 50-period SMA, further supporting an up move.

Financial Summary

Summary of the Key Financial Metrics for the past four years for Stanley Black & Decker Inc is as follows:

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Stanley Black & Decker Inc is looking technically well-placed on the chart, and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

Ternium S.A.

Ternium S.A. (NYSE: TX) is a steel-producing company that deals in finished and semi-finished steel products and iron ore. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

TX has recently broken a descending channel formation on the upside and is trading around the breakout level, indicating the possibility of an upward trend hereon. The recent upside movement in the stock is backed by a gradual increase in the volumes, further supporting a positive bias.  Now the next crucial resistance level for the stock appears at USD 50.00 and it may test this level in the short-term (2-4 weeks). A further movement above USD 50.50 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is trading at 50.36 levels, indicating a positive trend for the stock. The weekly volumes also seem supportive of the upside movement. The CMP is above the trend following indicator 50-period SMA, further supporting an up move.

Financial Summary 

Summary of the Key Financial Metrics for the past four years for Ternium S.A. is as follows: 

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Ternium S.A. is looking technically well-placed on the chart, and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the Russell 3000 Index and stocks’ prices:

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), the Entry Price is assumed to be at or above a certain level. However, a slight deviation in the 'Entry Price' can be considered depending upon the upside potential expected and also taking into consideration the Target 1 and trailing stop-loss levels indicated. For example: - An Investor can consider entering the stock at or above a certain range (3%-5%) from the Entry Levels recommended depending upon the potential upside expected. Therefore, there can be a slight deviation between the ‘Entry Price’ and the ‘Previous Close Price’. The ‘Entry Price’ indicated above may or may not be same as the ‘Previous Close Price’ shown in the price chart.

Note 1: Investors can consider exiting from the stock if the Target Price or Stop loss mentioned as per the technical analysis has been achieved and subject to the factors discussed above. 

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point. 

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 60% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is December 09, 2021. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.