Importance of index analysis ! Short Tech & Long Energy stocks.
Updated
It is critical to analyze indices when choosing stocks !
SPN (Energy sector of S & P ) outperformed SPX since start of new year . While SPX is officially in bear market , SPN gained above 30 % so far and was above 60 % at it's latest major high !.
SPX bounced back last week raising hopes for bulls however, I think it is just a bear market rally and worst may still on the way ! Please note in most bullish scenario SPX may fall down to 3300-3500 level. In moderate case scenario which I believe the most , SPX may see 2400 and in this case Dow will fall down to 18000 ! . This moderate scenario implies for end of about half of century bull run ( from 1974 to 2022). There is even worse case scenario which calls for completion of 90 years bull run from 1932 to 2022 !!! ( you can see my published video idea about DJIA and different scenarios). Please keep in mind that FED is insisting on rate hikes and we are still at half of rate hike road ! and Mr Powell finally accepted the risk of recession last week. Don't fight FED.
On the other side, Oil price is high which brings long term profit for oil companies e.g Exxon ! . Oil high price allows for extension of activities for giant oil companies which brings them more profit for example, margin oil fields which once were not commercial now become commercial and profitable ! . I believe oil is going to stay above 100 USD for long term considering OPEC's production capacity at the peak and simultaneous sanctions of IRAN, Venezuela and recently Russia !.
Now lets look at what we have on chart :
1. Candles are clearly below both 50 and 200 weekly moving averages and there may be a possible death cross in upcoming weeks.
2. Chart has lost 0.618 Golden ratio Retracement level of the entire up going wave from bottom to ATH. This former support now acts as a strong resistance .
3. Lost golden ratio support beautifully coincides with 0.236 Retracement of the latest major down going wave which makes our resistance even stronger.
4. In terms of Elliott waves, there is still one remaining leg down (wave 5 ) to complete the major impulsive down going wave started at ATH. End of Possible mentioned wave 5 may find the support at 0.786 Retracement level which is a strong supply/demand area as well.
All in all, there is no strong support in favor of SPX against SPN. As written on the chart, Technology stocks are among worst performing sectors in SPX in 2022. I believe they have still much room to go lower considering their sensitivity to rate hikes. For example, in case of loosing last support, NVDA will fall at least to 133 or even 75 in worse scenario. On the other hand, energy stocks e.g XOM or COP are completing internal waves of their long term ascending wave 3. Although they may see some negative days or even weeks , their general trend is up and remind this golden words in world of marketing which says : " Trend is our best friend . " To wrap up, I go short technology and go long energy stocks but certainly in appropriate time and safe trade setup.
I appreciate Tradingview's team for giving this chance to authors to participate in this interesting and encouraging competition.
Good luck everybody.
SPN (Energy sector of S & P ) outperformed SPX since start of new year . While SPX is officially in bear market , SPN gained above 30 % so far and was above 60 % at it's latest major high !.
SPX bounced back last week raising hopes for bulls however, I think it is just a bear market rally and worst may still on the way ! Please note in most bullish scenario SPX may fall down to 3300-3500 level. In moderate case scenario which I believe the most , SPX may see 2400 and in this case Dow will fall down to 18000 ! . This moderate scenario implies for end of about half of century bull run ( from 1974 to 2022). There is even worse case scenario which calls for completion of 90 years bull run from 1932 to 2022 !!! ( you can see my published video idea about DJIA and different scenarios). Please keep in mind that FED is insisting on rate hikes and we are still at half of rate hike road ! and Mr Powell finally accepted the risk of recession last week. Don't fight FED.
On the other side, Oil price is high which brings long term profit for oil companies e.g Exxon ! . Oil high price allows for extension of activities for giant oil companies which brings them more profit for example, margin oil fields which once were not commercial now become commercial and profitable ! . I believe oil is going to stay above 100 USD for long term considering OPEC's production capacity at the peak and simultaneous sanctions of IRAN, Venezuela and recently Russia !.
Now lets look at what we have on chart :
1. Candles are clearly below both 50 and 200 weekly moving averages and there may be a possible death cross in upcoming weeks.
2. Chart has lost 0.618 Golden ratio Retracement level of the entire up going wave from bottom to ATH. This former support now acts as a strong resistance .
3. Lost golden ratio support beautifully coincides with 0.236 Retracement of the latest major down going wave which makes our resistance even stronger.
4. In terms of Elliott waves, there is still one remaining leg down (wave 5 ) to complete the major impulsive down going wave started at ATH. End of Possible mentioned wave 5 may find the support at 0.786 Retracement level which is a strong supply/demand area as well.
All in all, there is no strong support in favor of SPX against SPN. As written on the chart, Technology stocks are among worst performing sectors in SPX in 2022. I believe they have still much room to go lower considering their sensitivity to rate hikes. For example, in case of loosing last support, NVDA will fall at least to 133 or even 75 in worse scenario. On the other hand, energy stocks e.g XOM or COP are completing internal waves of their long term ascending wave 3. Although they may see some negative days or even weeks , their general trend is up and remind this golden words in world of marketing which says : " Trend is our best friend . " To wrap up, I go short technology and go long energy stocks but certainly in appropriate time and safe trade setup.
I appreciate Tradingview's team for giving this chance to authors to participate in this interesting and encouraging competition.
Good luck everybody.
Note
Why Warren Buffett pours billions of dollars into OXY ?
Note
I proposed NVDA and XOM as candidates for taking short and long positions and just take a look at their chart now.Note
Time proves the value of an analysis !.
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