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Hotline Sample Report

This report is a sample for information purposes only. These recommendations are closed.
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9/27/2022 9:55:02 AM Eastern Time

HEADING FOR THE HILLS
By Charles Payne, CEO & Principal Analyst

 Click here to download PDF version

Yesterday was ‘selling begets selling’ and once it got going, would-be buyers stayed in their bunkers. The Heat Map says it all.

Market breadth continues to be an unmitigated disaster and speaks to the panic. 

Market Breadth

NYSE

NASDAQ

Advancers

572

1,433

Decliners

2,715

3,315

New Highs

11

24

New Lows

1,083

990

Up Volume

656.29 million

1.32 billion

Down Volume

4.19 billion

3.37 billion

 

Yes, this has been the worst new high-to-low ratio over the years, but this is the ugliest of 2022.

Moreover, the advance-decline ratio (ADR) has plunged.

Technical Breakdown

The S&P 500 closed at a new 2022 low, and now we look at potential support from here. First, there could be some support around 3,600, but 3,517 then 3,388 stand out as key tests.

S&P 500

Yields Soar

Meanwhile, everything is predicated on bond yields, which continue to run with reckless abandon.  

10-Year Bond Yield

Key Recession Read Recedes

As if the Fed needed more ammo to go buck wild on hiking rates, the 10 Yr/3M (10Y3M) curve flattened yesterday, beating a hasty retreat from inverting.

The U.S. Dollar (USDXY) continues to be a juggernaut that’s crushing the stock market and corporate profits, but it’s also harming nations around the world. The Bank of Japan (BOJ) has intervened with the Yen, and the Bank of England (BoE) seems concerned about the Pound. The global intervention comes with political overtures.

DXY

The U.S. Dollar is swamping all other currencies.

 

Conclusion

The selling is on autopilot, and Fed officials will keep jawboning the market lower. Meanwhile, the great debate on the Street is shifting to earnings. Estimates have come down dramatically, but conventional wisdom says the estimates must come in even more – a lot more.

In regard to the consensus when the results are released, I think there will be a majority of beats, although with a very guarded guidance. How much of this is already baked into the cake?  I’m not sure, but the pessimism and woe-is-me is over the top. But that is not enough to put on the brakes.

Portfolio Approach

We are adding a new position to Technology in our Hotline Model Portfolio.

Today’s Session

Economic Data

Durable goods orders declined for the second straight month, as the appetite continues to wane in an overall shift to the service economy.

But there was a nice pop in business investments +1.3% from +0.7% and consensus of +0.2%.  This is important because part of our long term investor strategy is to ride the business investments that look to counter the wage spiral and talent-gap, as well as prepare businesses to compete in the fourth industrial revolution.

The stock market is extremely oversold, so the morning pop is welcomed. But the real test comes with how well equities hold up into the close.

Long Idea: Enphase Energy, Inc. (ENPH) @ $285.10
Industry: Technology; Solar
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Closed
Entry Price$285.10
Entry Limitsee comments
Stop LossN/A
Target$338.00

BACKGROUND: Enphase Energy, Inc., together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level, and combines with its proprietary networking and software technologies to provide energy monitoring and control services. It also offers AC battery storage systems; Envoy communications gateway; and Enlighten cloud-based monitoring service, as well as other accessories. The company sells its solutions to solar distributors; and directly to large installers, original equipment manufacturers, strategic partners, and homeowners, as well as through its legacy product upgrade program or online store. Enphase Energy, Inc. was incorporated in 2006 and is headquartered in Fremont, California.

SKINNY: We mentioned in our last live event that we were looking to get back in this name. It is a more volatile than typical idea. Estimates remain solid growing more than 50bps in the last 90 days. Revenue growth is very strong, the most recent quarter was +68% y/y and EBITDA margins are very strong at 28%. Our target $338.


Key Fundamentals
PEG  2.24
Book Value  3.33
Institutional Holdings  76.18
Price/Sales  27.39
Average Daily Volume  3.56M
Shares Outstanding  135.46M
Market Value  38.6B
Insider Activity  14 Buys 13 Sales
52-week High  324.84
52-week Low  113.4
Annual Earnings Estimate  4.99

Analyst Coverage
 Guggenheim Downgraded  Neutral
 Barclays Initiated  Equal Weight
 Credit Suisse Upgrade  Outperform



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