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US Technical Analysis Report

As Russell 3000 Extended Losses, 2 Stocks with an Upside Potential – ET, AGRO

Jan 28, 2022

US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a marginally positive note; however, post that started to move downward. The index made a low of 2452.55 during the week and settled at 2505.66 with a week-to-date (WTD) loss of ~1.84 percent on January 27, 2022. Other major indices such as S&P 500 and NASDAQ Composite also showed a bearish movement for the week. On January 27, 2022, the S&P 500 index settled at 4326.51 with a WTD loss of ~1.62 percent, while NASDAQ Composite Index settled at 13352.783 with a WTD loss of ~3.02 percent.

The U.S. Federal Reserve kept the interest rates unchanged in the latest policy meet; however, stated that the committee is planning to raise the rate in the March meeting which affected the market sentiments adversely. A decline in the Flash Manufacturing PMI and Flash Services PMI further acted as the catalyst for a downward movement. However, an improved GDP Q4 (advance estimates) numbers limited the losses. 

Having understood the US market performance over the week, taking cues from major global news, and based on our technical analysis of the Russell 3000 index for the upcoming week, now let us have a look at the two NYSE/ NASDAQ listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Energy Transfer LP (NYSE: ET) and Adecoagro S.A. (NYSE: AGRO) for the next 2-4 weeks duration:

Energy Transfer LP 

Energy Transfer LP (NYSE: ET) is an energy company that owns natural gas storage in Texas and natural gas transportation pipelines. The company deals in several energy-related services. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

ET has broken a descending channel formation on the upside on January 12, 2022, and since then has been hovering around the upper band of the pattern, indicating the possibility of an upside movement hereon. Now the next major resistance level for the stock appears at USD 11.55 and prices may test this level in the short-term (2-4 weeks).

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is trading at 55.70 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. The CMP is above the trend following indicators 21-period SMA and 50-period SMA, further supporting the up-move.

Financial Summary

Summary of the Key Financial Metrics for the past four years for Energy Transfer LP is as follows:

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Energy Transfer LP is looking technically well-placed on the chart, and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

Adecoagro S.A.

Adecoagro S.A. (NYSE: AGRO) is a holding company involved in various food businesses such as farming crops and other agricultural products, sugar, dairy operations, ethanol, energy production, etc. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

AGRO has been sustaining above an upward sloping trend line for almost the past two years and has recently started to move upward after taking support of the same trend line, indicating the possibility of an upside direction. Now the next major resistance level for the stock appears at USD 9.00 and prices may test this level in the short-term (2-4 weeks).A further movement above USD 9.00 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI (14-period) is recovering from the lower levels and trading at 44.50 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. However, the trend-following indicators 21-period SMA and 50-period SMA are above the CMP, may act as the resistance levels.

Financial Summary 

Summary of the Key Financial Metrics for the past four years for Adecoagro S.A. is as follows: 


General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Adecoagro S.A. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the Russell 3000 Index and stocks’ prices:

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, and social and political instability risks etc.

Note 1: Investors can consider exiting from the stock if the Target Price or Stop loss mentioned as per the technical analysis has been achieved and subject to the factors discussed above. 

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point. 

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 60% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is January 27, 2022. The reference data in this report has been partly sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.