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 made a high of 2662.36 on February 02, 2022. The index witnessed some correction in the previous session and settled at 2594.10 with a week-to-date (WTD) gain of ~1.06 percent on February 03, 2022. Other major indices such as S&P 500 and NASDAQ Composite also showed upside movement for the week. On February 03, 2022, the S&P 500 index settled at 4477.44 with a WTD gain of ~1.03 percent, while NASDAQ Composite Index settled at 13878.818 with a WTD gain of ~0.79 percent.

The market sentiments were supported by positive economic data releases during the week such as JOLTS job openings and initial jobless claims. As per the U.S. Bureau of Labor Statistics, the US weekly initial jobless claims numbers decreased to 238,000 from 261,000 (revised level) in the prior week. However, a decrease in ISM Services PMI numbers limited the upside gains in indices.

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, the two NYSE/ NASDAQ listed stocks worth noticing from the technical standpoint. Noted below are the recommendations based on generic insights, entry price, target prices, and stop-loss for Cleveland-Cliffs Inc (NYSE: CLF) and Revolve Group Inc (NYSE: RVLV) for the next 2-4 weeks duration:

Cleveland-Cliffs Inc 

Cleveland-Cliffs Inc (NYSE: CLF) is a metals & mining company that produces flat-rolled steel and manufactures iron ore pellets in North America. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

CLF has been sustaining above an upward sloping trend line for the almost past two years and recently gained traction after touching the support of the same trend line, depicting some buying emerging from those levels. The recent upside movement in the stock is backed by volumes as well, further supporting a positive bias. From here, the next major resistance level for the stock appears at USD 21.75 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 21.75 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is recovering from the lower levels and trading at 44.68 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. However, the trend-following indicators 21-period SMA and 50-period SMA are above the CMP and may act as the resistance levels.

Financial Summary

Summary of the Key Financial Metrics for the past four years for Cleveland-Cliffs Inc is as follows:

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Cleveland-Cliffs Inc is looking technically well-placed on the chart, and we recommend a ‘Buy’ rating on the stock. Investment decision should be made considering the risk and reward ratio as per the financial constraints and liquidity preferences. 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:

Revolve Group Inc

Revolve Group Inc (NYSE: RVLV) is an online fashion retailer that operates through two segments: Revolve and Forward. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

RVLV has been keeping above the upward slopping trendline and the recent dip was bought into, indicating further strength in the stock price leading to the North. Now the next major resistance level for the stock appears at USD 58.00 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 58.00 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is recovering from the lower levels and trading at 40.83 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. However, the trend-following indicators 21-period SMA and 50-period SMA are above the CMP and may act as the resistance levels.

Financial Summary 

Summary of the Key Financial Metrics for the past four years for Revolve Group Inc is as follows: 

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Revolve Group 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 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.

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 February 03, 2022. 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.