US and European markets were up overnight - the US in anticipation of a potential pause in rate hikes indicated by two Federal Reserve officials and the EU in spite of more forecast rate hikes and an upward adjusted forecast of 5.8% inflation this year by the EU’s executive arm.
In the US, it was beleaguered tech stocks that claimed the spotlight, gaining ground as interest rate hike pressures eased.
The EU’s approval of Microsoft’s US$69 billion takeover of Activision Blizzard (NASDAQ:ATVI) boosted both stocks, by 0.2% and 1.2% respectively.
Meta Platforms also climbed 2.2% after Lop Capital upgraded the stock from a “hold” to a “buy” rating, and shares in Western Digital (NASDAQ:WDC) climbed 11.3% after it was reported the company and its Japanese joint venture partner Kioxia Holdings are accelerating merger discussions.
The Dow lifted 48 points or 0.1%, the S&P 500 enjoyed a 0.3% increase and the Nasdaq gained 0.7% or 80.5 points.
In Europe, political uncertainty as Türkiye’s election moved toward a runoff vote affected exposed markets, driving shares of the Spanish bank BBVA (BME:BBVA) down 4.2% as other similarly exposed banks followed suit.
Despite all that, the Eurofirst FTSE300 rose 0.2% and the UK FTSE100 lifted 0.3%.
Tech stock picks: Tesla (NASDAQ:TSLA), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN)
City Index senior market analyst Matt Simpson gives the low-down on three tech stock picks that could offer an “excellent” opportunity if and when the US debt ceiling is lifted.
Whilst Wall Street has mostly taken US debt-ceiling concerns within stride, the issue could severely hamper the economy (and therefore sentiment) if the US Government defaults on its debt
So, we may find that sentiment sours as the week progresses if heated talks between Democrats and Republicans remain in a deadlock.
Conversely, an excellent buying opportunity could present itself if or when the debt ceiling is inevitably raised once more. And that leaves opportunities for both bulls and bears, depending on how this plays out.
So, today we look at opportunities for the long or short side on Tesla, Alphabet and Amazon.
Tesla (TSLA) daily chart:
Price action on Tesla has been relatively choppy will ill-defined trends on the daily chart. However, several technical factors have come together to provide a potential swing-trade short for bears over the near term.
The recent rally effectively closed the gap at 177.65 and marked Friday’s high.
A bearish engulfing/outside day formed on high volume to suggest a key reversal and a bearish divergence formed on the RSI (2).
Furthermore, the key reversal formed around the monthly pivot point, 50-day exponential moving average (EMA) and just below the 100-day EMA.
The bias on the daily chart remains bearish whilst prices remain beneath Friday’s high
Bears could seek to enter a break of last week’s low, or fade into minor rallies within Friday’s range
Round numbers such as 160 and 150 make viable downside targets, but if risk-off prices markets it could potentially close the hap at 145.50 around the monthly S1 pivot
Alphabet (GOOG) daily chart:
Alphabet posted a strong 11% rally last week, its second time this year to hit double digits.
Wall Street clearly liked the announcement last week that AI will be incorporated into Google and helped the stock break convincingly out of a consolidation in the process.
Most of the trading activity within the consolidation took place at 105.84 to suggest this is where institutions were buying ahead of the breakout, and it is a level which could be defended upon any retracement.
The rally was also accompanied with strong trading volumes to show initiative buying as prices rose.
However, RSI (2) and (14) have reached overbought levels, so we would prefer to wait for prices to consolidate or retrace against last week’s rally before seeking long opportunities.
Bulls could seek long opportunities around gap support (113.51) or the highs around 110.
Alternatively, bulls could wait for prices to consolidate further around these highs and seek a bullish breakout on a lower timeframe
Initial upside targets for bulls to consider include 120 and the 123.23 high
Amazon (AMZN) monthly chart:
The stock fell -56% from its all-time high to the 2022 low, which is its worst drawdown since the Nasdaq bubble burst.
Yet the decline found support just above the 2020 low and formed a bullish outside month to show demand above $80.
We do not yet know whether this is part of a multi-year correction against its multi-year bull trend, but we can see that prices have reached a likely pivot area around, near the February high and 50% retracement level.
Notice that the market reversed lower around a 50% retracement level back in August 2022, so will history repeat this time around?
We have also noted that monthly trading volumes have diminished each month since the December low to suggest the current rally is losing steam, heading into these highs.
Amazon (AMZN) daily chart:
The daily chart shows prices are hesitant to immediately break above the February high, having pulled back on Friday.
But we also note that October’s VPOC (volume point of control) is also overhead at $116, and that is a level which may be defended by bears.
Over the near term, we’re looking for prices to close the gap at 106.79, so would consider fading into rallies below $116, a break beneath which brings the lows around $100 into focus.
And if that level breaks, we’ll assume it is part of a much larger risk-off move which brings $90 into view.
In other market news
Currencies gained against the US dollar overnight, with the Euro rising to US$1.0886 and near US$1.0875 at close, the Aussie lifting to US67.08 cents and near US67.00 cents at close and the Japanese Yen firming to JPY135.71 and near JPY136.10 at the US close.
Oil was also up on Monday, gaining 1.5% after declining over three trading days in a row.
The prospect of tightening oil supplies in North America warred with fears of recession, but oil won out in the end, with Brent Crude gaining 1.4% to US$75.23 a barrel and US Nymex lifting 1.5% to US$71.11 a barrel.
Base Metals and gold were a similar story, with copper futures gaining 0.6%, aluminium futures 0.5%, and gold lifting 0.1% or US$2.90 to US$2,022.70 an ounce.