US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a bearish note and continued the momentum for the entire week. The index made a low of 2600.49 during the week and settled at 2603.06 with a week-to-date (WTD) loss of ~4.09 percent on January 20, 2022. Other major indices such as S&P 500 and NASDAQ Composite also showed a sharp bearish movement for the week. On January 20, 2022, the S&P 500 index settled at 4482.73 with a WTD loss of ~3.86 percent, while NASDAQ Composite Index settled at 14154.020 with a WTD loss of ~4.97 percent.

A sudden increase in the U.S. 10-Year Bond yield coupled with the higher initial jobless claims’ numbers acted as the catalyst for the downside direction. As per the U.S. Bureau of Labor Statistics, the US weekly initial jobless claims numbers increased to 286,000 from 231,000 (revised level) in the prior week.

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 Full Truck Alliance Co. Ltd. ADR (NYSE: YMM) and Aris Water Solutions Inc (NYSE: ARIS) for the next 2-4 weeks duration:

Full Truck Alliance Co. Ltd. ADR 

Full Truck Alliance Co. Ltd. ADR (NYSE: YMM) is an online freight dispatch platform engaged in connecting shippers with truckers to enable shipments across the People's Republic of China. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Daily Chart) 

YMM is trading above the upper band of a falling wedge pattern breakout level for the past 2 weeks, indicating the possibility of an upside movement. The recent upside movement in the stock is backed by volumes as well, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 10.90 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 10.90 may extend buying in the stock.

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, RSI (14-period) is trading around mid-point at 49.33 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. The CMP is above the trend following indicator 21-period SMA, further supporting an up-move; however, 50-period SMA is above CMP and may act as a resistance level.

Financial Summary

Summary of the Key Financial Metrics for the past two years for Full Truck Alliance Co. Ltd. ADR is as follows:

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Full Truck Alliance Co. Ltd. ADR 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:

Aris Water Solutions Inc

Aris Water Solutions Inc (NYSE: ARIS) is an environmental infrastructure and solutions company engaged in reducing water and carbon footprints. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Daily Chart)

ARIS has recently broken a falling trendline on the upside, indicating the possibility of an upside direction. Price has also broken a crucial resistance level of USD 13.21 on the upside, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 15.25 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 15.25 may extend buying in the stock.

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, RSI (14-period) is trading at 56.11 levels, indicating a positive trend for the stock. The volumes also seem supportive of the upside movement. The CMP is above the trend following indicator 21-period SMA and 50-period SMA, further supporting an up-move.

Financial Summary 

Summary of the Key Financial Metrics for the past two years for Aris Water Solutions Inc is as follows:

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that Aris Water Solutions Inc 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 20, 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.