Weekly newsletter of MYstylework - Issue #80
NOTHING IS CAST IN STONE
NOTHING IS CAST IN STONE....
Things never stay the same, neither is anything cast in stone... except the tombstone of course!
As I was scrolling my mailbox, I received this article that said RIP "FAANG". Not that "FAANG" has become "MAANG" after Facebook changed its name to Meta but these top beloved stock is now breaking apart!!! There is 2 companies which is now being kicked out of the rich boys club. #1 Meta and #2 Netflix.
Meta is now trading at 52 weeks low at $140 and that's a whopping 64% shaved off its all time high. It has now reached the pandemic selldown lows... Frankly, if you asked people who uses Facebook for its advertising is purely out of no choice that they remain in business with them just because they still hold a high user base. Given an alternative, they would love to ditch Facebook and switch to another platform.
#2 out of the list is Netflix. Used to be the darling and trading at $700 when Squid Game was "the Movie" with all eyes on it. Today, it is down 68% and trading at a mere $226. Okay, I still pay MYR55 a month just in case I need to watch something while waiting to close a running trade. But in reality, most people either pay 1/5 by sharing an account or even get it for practically free by getting a hacked account, that's what I hear in India. Maybe it is not as easy to stay above as the space gets more crowded with Amazon Prime, Disney, Hulu and so on all trying to get the same TV viewer. Not to say the hacked channels coming from the China TV Boxes.
So with Meta and Netflix out, who are the new boys representing the new FAANG or now called "MATANA" not "haku matata" ok! Instead of Meta it is now Microsoft. A software giant who have successfully moved into subscription based software which makes it very sticky for its users. People relatively stuck to Windows for centuries and not to say the Microsoft Office suites now turned Office 365. Although Google Sheets are free, people still pays for Excel. The same for the rest like word and powerpoint.
The next new boy is Tesla, yes you got it right "TESLA"!!! However you hate it and never believe that an automobile company would hit the top investible company list, it has now reached that status. Alright, it is now a profitable company but being in the automobile sector with another 50 companies doing EV, it can one day become another GM or Ford, trading at the teens... For now, it is in demand because it just continues to make babies splits after splits... making it also very tempting not to have it in our portfolio, but still the long term portfolio risk is high, so just trade it. 😆
The 3rd baby is NVIDIA. Although this stock have also dropped 64% todate trading at $125 the graphic card business is still huge with almost all high end PCs having one inside and not to forget those used in autonomous automotive and also the crypto miners and many other hardware applications. I still recall how posh it was to buy a NVIDIA graphic card upgrade and the satisfaction to plug it into the PC motherboard during my university days! Now you know I spent most of my time gaming instead of studying back in the days 😆.
The old boys are still Apple, Alphabet and Amazon the 3 Aces!
There you go MATANA...Microsoft, Apple, Tesla, Alphabet, Nvidia and Amazon.
One year ahead, things might change again and MATANA might change to just MAAA...
SPX - 3693
Another level down after the 3900 level was taken out, it has now reached the 3700 level. We are officially back to above 20% down from all time high, at 23% down to be exact. The bears are officially taken back the market. Gone for any hope of the bulls for time being. We were just short of 11 points to test the June low of 3636 as we closed 3647 last Friday. Also a few points to hit the weekly 200 moving average.
The glimmer of hope of lower interest rates coming after the last Fed Fund Rate hike was all gone. In fact, Jerome Powell even pressed on it to end the year with 4.4% interest paving for another 2 hikes before year end and letting it stay at 4.6% for 2023. All in the name of bringing down inflation to 2% and he will do whatever it takes even if he brings the market down to its knees! Also, at the expense of unemployment.
Frankly, raising interest rates is not the sole solution that will be able to solve the inflation issue. If you look at the component of CPI basket, you will see that all these are necessities by itself and with the current state of global economy and issues surrounding, I doubt prices will decline even if people does not spend.
Refer here for details of the CPI basket.
The next down level to watch for is 3600 level and the weekly 200 MA. If we form a double bottom from June's lows and rebounce with a bullish pinbar, then there is going to be some oversold retracement this week. If J.Powell soften his hawkish mouth on Tuesday and Wednesday speech, we might get a relief rally.
Trading range for the week is between 3500 and 3850.
NDX - 11311
We are back to square one and given back everything from the 2 months rally. NDX is now back to its June lows and closed at 13111. We will see if NDX retest the 16 June low of 11037 next week and form a double bottom. It needs to push its head up above this level to effect a reversal pattern, if not more downside in store.
Valuations of tech stocks are going to be hammered as the hope of reduced rate hike is quite slim. As we move to 4.4% by year end and 4.6% next year, the higher rates will increase borrowing costs, reduce consumption/economic growth and also the discounting factor used in valuations of the tech stocks, bringing down further their values.
Levels to watch 11000 to the lows and the weekly 200 MA around 11200 are the next rundown levels. Bear in mind, we did not break 200 MA during the Covid lows and now we are at the Hell's gate again.
We expect this week's range to be at 10600 to 11800. Futures opened red on Monday.
BACKRATIO...
We took off the SPY backratio for a 7x profit. We entered when SPY was trading around 384 and closed around 364. Our backratio was Sell Call 284 (x1) and buy Call 362 (x2) for a debit of $0.13 and exit was $1.00. Low risk high return strategy! We will benefit when movement is high, a 5-6% swing will do the trick and considering todays volatility, such movements comes by quite often. Checkout the strategy here.
We have another QQQ backratio is still running and lets see if this week, there will be further downside.
Tik Tok Videos
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DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.