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US Technical Analysis Report

Two Stocks Trading in a Positive Territory, despite Russell 3000 Slumped Below 2300 Mark – PJT, CLW

May 13, 2022

US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across various market capitalizations, started on a negative note and continued in the same direction. The index made a low of 2,222.89 during the week and settled at 2,264.05 with a week-to-date (WTD) loss of ~4.89% on May 12, 2022. Other major indices such as S&P 500 and NASDAQ Composite also showed sharp bearish movement throughout the week. On May 12, 2022, the S&P 500 index settled at 3,930.08 with a WTD loss of ~4.69% and the NASDAQ Composite Index settled at 11,370.962 with a WTD loss of ~6.37%.

The ongoing geopolitical scenario coupled, with the fear of rising interest rate risks, and the increase in the initial jobless claims number to 203,000 from 202,000 (revised level) in the prior week acted as the catalysts for the negative sentiments. Notably, as per the latest release from the US Bureau of Labour Statistics, the Consumer Price Index (CPI) declined to 8.3% in April 2022 compared to 8.5% in March 2022.

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 PJT Partners Inc. (NYSE: PJT) and Clearwater Paper Corporation (NYSE: CLW) for the next 2-4 weeks duration:

PJT Partners Inc. 

PJT Partners Inc. (NYSE: PJT) is an advisory-focused investment bank. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Daily Chart)

PJT has broken a downward sloping trend line towards the upside on April 19, 2022, and since then has been trading above the breakout level, indicating the possibility of further upside movement. The recent upside movement in the stock is backed by increasing volumes as well, supporting a positive bias. Now the next major resistance level for the stock appears at USD 80.00 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 80.00 may extend buying in the stock. 

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, the leading indicator RSI (14-period) is showing a reading of 66.25, indicating a positive momentum build-up at the current levels. Prices are trading above the trend-following indicator 21-period SMA and 50-period SMA, further supporting an up-move.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude that PJT Partners Inc. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decisions should be made depending on an investor’s 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:

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Clearwater Paper Corporation

Clearwater Paper Corporation (NYSE: CLW) is a paper products company that manufactures and supplies bleached paperboard and consumer and parent roll tissue. Noted below are the key price Indicators for the stock: 

Price Action Analysis (on the Daily Chart)

CLW has broken a crucial resistance level of USD 30.79 on April 29, 2022, and since then has been sustaining above the breakout level, indicating the possibility of an upside movement hereon. Now the next major resistance level for the stock appears at USD 38.90 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 38.90 backed by volumes may extend buying in the stock.

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, the leading indicator RSI (14-period) is showing a reading of 64.94, indicating a positive momentum build-up at the current levels. Prices are trading above the trend-following indicator 21-period SMA and 50-period SMA, further supporting an up-move.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, we can conclude Clearwater Paper Corporation is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decisions should be made depending on an investor’s 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:

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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 50% 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 50% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is May 12, 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.

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