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Hotline Sample Report

This report is a sample for information purposes only. These recommendations are closed.
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2/6/2024 10:09:34 AM Eastern Time

FEEDING FRENZY
By Charles Payne, CEO & Principal Analyst

 Click here to download PDF version

Only large-cap growth rallied yesterday, and now, it's becoming absurd.

Moreover, market breadth was significantly worse than the -0.32% decline in the S&P 500 suggests. What’s more, the most telling deterioration is happening on the New York Stock Exchange (NYSE).

Tough Sledding

Only two sectors finished the session in the plus column. I’m very disturbed by the action in Real Estate (XLRE).

And I’m even more concerned with the selling of regional bank stocks. I don’t think there is contagion to big banks. In fact, the Fed could use a crisis there to pump more money into the economy.

SLOOS

The Federal Reserve Senior Loan Officer Opinion Survey (SLOOS) on bank lending continues to see banks tighten somewhat and considerably on commercial real estate loans in all categories, including construction, nonresidential, and multifamily.

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The real risk comes with the wave of refinances scheduled around the corner.

Momentum Darlings

Only the momentum darlings are getting love, and it's borderline cult-like.

S&P 500 Map

Moving to Technical and Behavioral

From our three-pillar system, fundamentals are playing a very limited role, as groupthink and panic buying, coupled with moves through key chart levels, have created a limited feeding frenzy. This will bring key support points into play on the downside.

Portfolio Approach

We are adding a new position in Communication Services (NFLX) this morning in the Hotline Model Portfolio.

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Today’s Session

The market is opening higher, but the buying continues to become even more narrow.  Momentum names have gone off the rails and are skewing the overall market more than ever.

According to sentiment trader:

  • The S&P 500 is within .35% of a 3-year high.
  • Fewer than 40% of its stocks are above their 10-day avg.
  • Fewer than 60% are above their 50-day.
  • Fewer than 70% are above their 200-day.

Since 1928, that's only happened once before: August 8, 1929.

Meanwhile, the spike in the ten-year treasury raises a yellow flag.  In addition, inflation expectations are also moving higher.

Chart

This morning, Deutsche Bank moved into the ‘no recession’ camp, leaving a handful of firms, when it was once unanimous.

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The problem with all these firms becoming so optimistic is they are also looking for a tidal wave of rate cuts (although DB lowered their count).

I don’t think they can have both.

Long Idea: NetFlix Inc. (NFLX) @ $564.12
Industry: Communication Services; Entertainment
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Closed
Entry Price$564.12
Entry Limitsee comments
Stop LossN/A
Target$700.00


Long Option Trade Parameters
Status Closed
Type Call
Option Symbol NFLX240621C00560000
Entry Price $49.00
Strike Price $560.00
Expiration Date 6/21/2024
  Add to Position Tracker

BACKGROUND: Netflix, Inc. provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices. It has operations in approximately 190 countries. The company was incorporated in 1997 and is headquartered in Los Gatos, California.

SKINNY: Netflix streaming reflects growth across all regions with Poland Netflix with the largest market share. Revenues continue to rise, and margins continue to expand. Our target is $700.


Key Fundamentals
PEG  1.95
Book Value  47.57
Institutional Holdings  84.6
Price/Sales  7.28
Average Daily Volume  4.81M
Shares Outstanding  432.8M
Market Value  242.5B
Insider Activity  21 Buys 20 Sales
52-week High  579.64
52-week Low  285.33
Annual Earnings Estimate  21.18

Analyst Coverage
 Seaport Research Downgrade  Neutral
 DZ Bank Upgrade  Buy
 Macquarie Upgrade  Outperform



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