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US Technical Analysis Report

One NASDAQ-Listed Stock Trading in the Buy Zone Despite a Drop in Russell 3000 Index–VSEC

Nov 04, 2022

US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a negative note and continued its weak momentum. The index made a low of 2143.86 during the week and settled at 2158.27 with a week-to-date (WTD) loss of ~4.54 percent on November 03, 2022. Other major indices, such as S&P 500 and NASDAQ Composite witnessed negative movement for the week. On November 03, 2022, the S&P 500 index settled at 3719.88 with a WTD loss of ~4.64 percent, while the NASDAQ Composite Index settled at 10342.94 with a WTD loss of ~6.84 percent.

As per the latest release by the Institute for Supply Management (ISM), the Service PMI in October 2022 registered at 54.4 percent, against a reading of 56.7 percent in September 2022 and acted as a catalyst for a downside movement. However, a decrease in the US Unemployment Insurance Weekly Claims numbers to 217,000 from 218,000 (revised level) in the prior week limited the losses.

Having understood the US market performance over the week, taking cues from major global news, and based on technical analysis of the Russell 3000 index for the upcoming week, now let’s have a look at the one NASDAQ-listed stock to pick from the technical standpoint. Noted below recommendation is based on the entry price, target prices, and stop-loss for VSE Corporation (NASDAQ: VSEC) for the next 2-4 weeks duration: 

VSE Corporation

VSE Corporation (NASDAQ: VSEC) is a service provider company engaged in repair, distribution, logistics, and consulting services in the public and private sectors. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Daily Chart)

VSEC’s prices broke a long-term downward sloping trendline by an upside and are sustaining above the breakout level from the past few trading sessions, indicating the possibility of upside momentum hereon. The recent upside movement in the stock is backed by increasing volumes as well, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 55.00, and prices may test this level in the short-term (2-4 weeks). A further movement above USD 55.00 may extend buying in the stock.

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, the leading indicator RSI (14-period) is moving in a positive zone and showing a reading of 63.63. The volumes seem supportive of the next upside movement. The prices are trading above the trend-following indicators 21-period and 50-period SMA, which may support the prices.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, VSE Corporation is looking technically well-placed on the chart, and a ‘Speculative Buy’ recommendation has been given on the stock. Investment decisions should be made depending on an individual’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 recommendation is as follows:

Markets are trading in a highly volatile zone currently due to certain macro-economic and prevailing geopolitical tensions. 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:

Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. 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: Individuals 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

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. This report is based on ~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. Individuals can Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. Individuals 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, currency, technical indicators, support, and resistance levels is November 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 individuals. Technical reports in general chart out metrics that may be assessed by individuals 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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