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 made a low of 2397.37. The index managed to recover some of the losses in the latter half of the previous session and settled at 2498.95 with a week-to-date (WTD) loss of 1.25 percent on February 24, 2022. Other major indices such as S&P 500 and NASDAQ Composite also showed downside movement for the week. On February 24, 2022, the S&P 500 index settled at 4288.70 with a WTD loss of ~1.38 percent, while NASDAQ Composite Index settled at 13473.585 with a WTD loss of ~0.55 percent.
The market tanked in the current week due to the war fiasco between Russia and Ukraine. However, improved US Fourth Quarterly GDP estimates supported the indices to recover from the lower levels along with the bargain hunting from the investors. A decrease in the US weekly initial jobless claims numbers to 232,000 from 249,000 (revised level) in the prior week further helped to limit the losses.
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 Forestar Group Inc (NYSE: FOR) and Uranium Energy Corp. (NYSE: UEC) for the next 2-4 weeks duration:
Forestar Group Inc
Forestar Group Inc (NYSE: FOR) is a real estate company that operates as a residential lot developer. Noted below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
FOR has recently tested a crucial support level of USD 18.00 and started to move upside, indicating the possibility of an upside reversal. 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 21.00 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 21.00 may extend buying in the stock.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is trading at 39.52 levels, indicating a positive momentum building in the stock at lower levels. 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.
Summary of the Key Financial Metrics for the past four years for Forestar Group Inc is as follows:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Forestar Group 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 investors’ appetite on 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:
Uranium Energy Corp.
Uranium Energy Corp. (NYSE: UEC) is a uranium mining and exploration company engaged in the exploration, pre-extraction, extraction, and processing, on uranium projects. Noted below are the key price Indicators for the stock:
Price Action Analysis (on the Weekly Chart)
UEC has broken a falling wedge pattern on the upside on February 15, 2022, and since then has been hovering around the upper band of the pattern, indicating the possibility of an upward trend hereon. The recent upside movement in the stock is backed by higher volumes as well, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 3.90 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 3.90 may extend buying in the stock.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is trading at 52.03 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. Prices are trading above the trend-following indicator 50-period SMA, further supporting an up-move; however, 21-period SMA is above the CMP and may act as the resistance levels.
Summary of the Key Financial Metrics for the past four years for Uranium Energy Corp. is as follows:
As per the above-mentioned price action and technical indicators analysis, we can conclude that Uranium Energy Corp. 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 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.
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.
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 24, 2022. The reference data in this report has been partly sourced from REFINITIV.
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.
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