Rippy Global Weekly Outlook - April 3 to April 7
April 3-April 7, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. Last week the market got a huge bullish breakout with the Nasdaq seeing the best quarter since 2020.
A lot of analysts, looking back on previous data, are seeing that we may be in for a good year. If Q1 of the year has a gain of +7% in the S&P 500, the year has ended up green 16/16 times- closing at an average of +23%!
This has even led Big Short Burry to claim a switch in sentiment:
Last week and this weekend, we got some big moves and news in three sectors- EV stocks, Oil, and AI names.
This weekend, Tesla released their delivery numbers which just edged past estimates of 421.2K with a released number of 422,875. It will be interesting to see how investors react to this news because of the amount of price cuts in the EV industry. The smaller names are also releasing their numbers, including NIO which reported a 4% YoY growth in deliveries.
I do not think that price cuts are bad for these companies- in fact, specifically for Tesla, they profit more money than any of their rivals per car sold. Essentially, I don’t think these price cuts are a bearish sign because they are using their production cost advantage to fund them.
This strategy of using this advantage to bully out smaller competitors is not new and has been used by Ford and Toyota in the past.
Next, we got some big news in the oil space this weekend with OPEC+ announcing surprise oil output cuts. Oil had continued to fall since many people thought the banking crisis would diminish demand, but now analysts are expecting the price of oil to move by $10 higher! This should drive $USO and Crude Oil higher this Monday morning.
Lastly, AI stocks had a strong week with $AI which is the market leader in AI stocks closing up 21%. Goldman Sachs released a report on AI stocks that focused on generative AI, startup OpenAI, and ChatGPT. The report suggests that integrating generative AI tools into products will lead to increased spending on software by customers and an additional $150 billion to the global software market. The report also suggests that generative AI could impact 300 million jobs globally and raise annual global GDP by 7% over 10 years. It says the two top stocks to benefit this are Microsoft and Shutterstock.
However, concern over the potential damage AI could do to humanity persists, and more than 1,000 technology industry leaders and researchers have called for a moratorium on the development of the most powerful AI technologies. Elon Musk, Steve Wozniak, and more have all signed a petition to slow the development of AI tools.
#1) There are no interesting earnings to me this week.
#2) As I mentioned, all the EV names will have extra volatility because they report their delivery numbers. Names to watch are $F Ford, $RIVN Rivian, $NIO, $XPEV, and $F.
#3) Academy $ASO is hosting their first investors day event on Tuesday to discuss their long term plan. There are also investors days for $DOMO and $YEXT which have moved in the past on these days.
#4) Wednesday will be a big day for retail, with Walmart having an investors event and Costco reporting monthly sales.
#5) On Thursday, Fed Speaker Bullard (aka Bullard the Bear) is giving a speech on monetary policy.
#5) On Friday, the market is closed! US Jobs numbers will be released nonetheless so be careful with swings.
The S&P 500 ($SPX index) had a huge breakout on Friday and is approaching this large trendline level. This will be the big level that everyone is watching.
If we do break out, I am considering $4300 to be the price target and that is because of JP Morgan’s huge collar trade they placed this Friday.
Here is the JPM Collar spread involving $541M in premium straight from the exchange floor:
The protective put option acts as insurance, providing downside protection by allowing JPM to sell their shares at a predetermined price if the market drops. The covered call option generates income by selling the right to buy the shares at a predetermined price if the market rises.
AKA the best case scenario for JPM is for the stock price to be at the price of the call they wrote.
The most important levels on the dark pool tape are $403.65 and $409.75 on SPY.
My key breaks are $4150 for bulls and $4074 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
Options Flow Reading
Here are the options with the largest open interest:
There are a lot of options open on CHPT (which is an EV charging name) which is interesting because of the catalysts I mentioned above on EV stocks and there is also interest in BTG which is a small cap gold name.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla is breaking out of this inverse head and shoulders, but we will see something I call the “catalyst drift” this week. After we get their deliver numbers, we want to see which way the stock drifts after as this will show where the accumulation is going. I do think this stock will tap $250 unless we break back under $195 and fail this breakout.
Last week I said $AAPL has room to $165 and that is exactly where we closed this week. We are now approaching a chop zone for this name so I’m not sure this will be the best name to trade. Rumor has it they will launch their VR headset in June, but employees are worried about low sales.
Flow is still bullish:
I like these cheap crypto names for a run this week. This one is trading just under $2 and if Bitcoin stays strong these names should all break out. Since they’ve been consolidating for so long, options are pretty cheap. Another great crypto chart is $MARA.
KSS saw buys from the CEO and HHC saw buys from Bill Ackman’s Pershing Square Capital and has a great chart.
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)
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