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US Technical Analysis Report

2 Stocks Gaining Upside Momentum as Russell 3000 Traded Positive– AEM, PLL

Apr 29, 2022

US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market, started on a negative note and made a low of 2412.24 on April 27, 2022. However, the index recovered in the previous session and settled at 2482.03 with a week-to-date (WTD) gain of ~0.22 percent on April 28, 2022. Other major indices such as S&P 500 and NASDAQ Composite showed marginally positive movement for the week. On April 28, 2022, the S&P 500 index settled at 4287.50 with a WTD gain of ~0.37 percent and the NASDAQ Composite Index settled at 12871.528 with a WTD gain of ~0.25 percent.

The market sentiments turned positive after the release of initial jobless claims which declined to 180,000 from 185,000 (revised level) in the prior week, supporting the indices. However, a decrease in the gross domestic product (GDP) at an annual rate of 1.4% in Q1 of 2022 limited the gains.

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 Agnico Eagle Mines Limited (NYSE: AEM) and Piedmont Lithium Inc. (NASDAQ: PLL) for the next 2-4 weeks duration:

Agnico Eagle Mines Limited 

Agnico Eagle Mines Limited (NYSE: AEM) is a Canada-based mining company engaged in producing precious metals. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

AEM has been sustaining above a downward sloping trend line for the past couple of weeks and recently started to move upward after taking the support of the same trend line, indicating the possibility of an upside movement hereon. Now the next major resistance level for the stock appears at USD 67.20 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 67.20 may extend buying in the stock.  

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is hovering around the mid-point and showing a reading of 48.18. Prices are trading above the trend-following indicator 21-period SMA, supporting an up-move; however, the 50-period SMA is above CMP which may act as a resistance level for the stock.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Agnico Eagle Mines Limited is looking technically well-placed on the chart, and we have a ‘Buy’ rating on the stock. Investment decisions should be made depending on an investor’s 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:

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Piedmont Lithium Inc.

Piedmont Lithium Inc. (NASDAQ: PLL) is a lithium company. engaged in the development of its Piedmont Lithium Project in North Carolina. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Daily Chart)

PLL has recently tested crucial support of USD 64.36 and started to move upside, indicating the possibility of an upside movement hereon. Now the next major resistance level for the stock appears at USD 80.00 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 80.00 backed by volumes may extend buying in the stock.

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, RSI (14-period) is hovering around the mid-point and showing a reading of 49.44. Prices are trading above the trend-following indicator 50-period SMA, supporting an up-move; however, the 21-period SMA is above CMP which may act as a resistance level for the stock in the near term.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude Piedmont Lithium Inc. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decisions should be made depending on an investor’s 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:

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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 a short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and the 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, 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 50% 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 50% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is April 28, 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-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

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