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US Technical Analysis Report

Russell 3000 Index takes a Breather, 2 Stocks with an upside potential: NEP, ZUO

Jun 18, 2021

US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a positive note and made a new lifetime high of ~2547.64 on June 15, 2021. However, in the latter part of the week, all its earlier gains were erased and on June 17, 2021, the index settled at 2525.25 with a week till date (WTD) loss of ~0.72 percentOther major indices such as S&P 500 and NASDAQ Composite showed mixed movement during the week. On June 17, 2021, the S&P 500 settled at 4221.86 with a WTD loss of ~0.60 percent, while NASDAQ Composite Index settled at 14161.35 with WTD a gain of ~0.65 percent.

Indices witnessed negative movement after the Federal Open Market Committee in the US signalled the possibility of two interest rate hikes in 2023. The increase in the US weekly Unemployment Claims coupled with the decrease in monthly Retail Sales and Core Retail Sales data (released by the US Census Bureau) further supported the downside direction. As per the data released by the US Bureau of Labor Statistics, US weekly unemployment claims increased to 412,000 from 376,000 in the prior week and acted as the catalyst for a downward movement.

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 NextEra Energy Partners LP (NYSE: NEP) and Zuora Inc (NYSE: ZUO) for the next 2-4 weeks duration:

NextEra Energy Partners LP 

NextEra Energy Partners LP (NYSE: NEP) is a US-based renewable energy company. The company owns and operates clean energy projects such as solar, wind power, and natural gas pipeline projects in North America. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

NEP's price broke a symmetrical triangle pattern on the upside on June 08, 2021 and has since then been trading above the breakout level, indicating an upward direction for the stock. The breakout is supported by the sharp rise in volumes, thereby higher market participation supporting the upside movement. Now the next major resistance level appears at USD 88.30, and prices may test that level in the short-term (2-4 weeks). A further breakout above USD 88.30 backed by volumes may extend buying in the stock till the next resistance level USD 95. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~56.73 levels and indicating a positive trend for the stock. The weekly volumes are showing an increasing trend and seems supportive of an upside movement. The CMP is above the 21-period and 50-period SMA with a positive crossover, further providing support for the upward movement.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that NextEra Energy Partners 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:

Zuora Inc

Zuora Inc (NYSE: ZUO) is a cloud-based software organization. The company provides software solutions for businesses to manage and launch their subscription-based services. The company’s products include Zuora Billing which is designed to automate the recurring bills, collections, quoting, and subscription metrics. Noted below are the key price Indicators for the stock: 

               

Price Action Analysis (on the Weekly Chart)

ZUO's prices are sustaining above an upward sloping trend line for more than a year, indicating an upside direction for the stock. Prices recently started to move upside after consolidating for more than a month and for the short-term (2-4 weeks), we may expect continuity of the upward trend. Now the next major resistance level appears at USD 21.35, and prices may test this level in the coming sessions.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~58.80 levels and indicating a positive trend for the stock. The weekly volumes are showing an increasing trend and seems supportive of the upside movement. The CMP is above the 21-period and 50-period SMA with a positive crossover, further providing support for an upward direction.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for Zuora Inc is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Zuora Inc 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 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.

Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

Note: 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.

Note: The reference date for all price data, volumes, technical indicators, support, and resistance levels is June 17, 2021. 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. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.


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.

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