Market Radar 19. December 2022


Are Internet stocks on the verge of a comeback?

S&P 500 back below 200-day moving average

The highly regarded 200 moving average is currently quoted at 399.99 in the ETF for the S&P 500 (SPY). Last Wednesday, the ETF fell below this moving average for the second time. If the SPY does not regain the 400 mark by the end of the year, it may tempt investors, who often follow trends, to stay away from the stock market or even take short positions at the beginning of the year.

The RSI(27) in the SPY has now fallen below 50 again in the weekly chart, so that here too the chances for a continuation of the bear market are higher in the medium term than a resurgence of the bulls.

Swing chances until New Year’s Eve ?

But maybe the bears will take a little time with their “blow” for the bulls: In the stock market, a few quite good swing set-ups can be discovered on the long side for Monday, so that we could still trade one or the other up movement until New Year’s Eve – if a trader currently wants to actively search for set-ups at all.

Liquidity is likely to be low in the stock market until New Year’s Eve, which could increase volatility in individual stocks.

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What do we see under the radar of the major stock indices?

Gold mines and food stocks were among the outperformers on Friday. REITs to the underperformers.

Medical devices for gynaecology

The entry stamps for the Healthcare (XLY), Pharma (IHE) and Transport (IYT) sectors, which were still spotted on the market radar on Friday, have become obsolete for today, as the corresponding ETFs have now also fallen below the last higher intermediate low. From the healthcare subgroup, only the ETF for medical devices (IHI) can still hold its own above a higher interim low. 

From this industry, the company Hologic (HOLX; Market capitalization: approximately $19 billion).

Hologic specializes in gynaecology and develops, manufactures and distributes instruments and devices that are mainly used in diagnostics, but also in surgical procedures. These include breast disease, hepatitis and uterine cancer, contraception and other areas that predominantly affect women.

The quarterly figures published on 31 October were significantly higher than estimates. Profit was about 25% and sales about 10% above expectations. For just over a year, the stock has been moving in a range between $60 and $80 (all-time high of February 2021 is $85), with an embedded range between $72 and $76 recently formed in the chart after the earnings impulse in early November. Two outbreak attempts on 1 December and 13 December had failed.

Analysts expect a decline in sales and profits for the stock by 2024. Revenue is expected to shrink from $5 billion to $4 billion, earnings per share from about $5 billion to 4. This allows a current P/E ratio of 14 to be calculated, which is expected to rise to 19 by 2024. If you compare these key figures with the values from the past for this stock, then the company would be roughly fairly valued in 2024 and currently undervalued.

Hospitals and radiology clinics will have to pay between $300,000 and $500,000 for Hologic mammography machines, depending on whether 2D or 3D imaging is ordered. Such an order alone can therefore immediately lead to a jump in sales in the annual balance sheet, which is currently not yet priced in. I expect positive and not negative surprises for the coming quarterly figures. Since the stock is rather low-volatile, it could prove to be a rock in a volatile market environment and would still be good for surprises. On the chart, the stock seems to have strong support in the open gap around $72.50.

The stock is currently trading at $73.73. New quarterly figures will be published at the end of January 2023. This stock would also be interesting for a pre-earning trade.

In addition to the medical device industry, we see entry stamps for today in areas that we wouldn’t necessarily expect now that the bear market may continue.

Suppliers with good swing set-ups?

The fact that we see an entry stamp at the suppliers (XLU) for today is perhaps not really surprising. The ETF XLU fell below the interim low reached on December 6 ($ 70.26) intraday on Friday, but was able to close above it ($ 70.48). A swing trade could be dared today in a stock from the utility industry.

For a swing trade, for example, the US utilities AES Corp. (AES), Pinnacle West Capital Corp. (PNW) or PPL Corp. (PPL) are suitable. All three stocks have not fallen below the last higher low at the end of the day and are somewhat oversold in terms of chart technology.

Does Facebook benefit from a possible Tiktok ban in the US?

Today, we also award entry stamps for the “Social Media” and “Internet Cloud” industries. This is somewhat surprising, as these industries are considered risk-on on the stock exchange – in contrast to the providers that apply to the risk-off class. Internet stocks actually only turn on the turbo gear in already heated bull markets