Wishing to launch the week ahead of the pack? Embrace Momentum Mondays, where we dissect the prime breakout stocks in the market, encapsulate the major events of the coming week, and equip investors for lucrative trading.
Today, we will assess the broad stock market indexes to encapsulate the recent weeks’ action. We will then delve into the economic calendar and earnings releases to address any potentially market-moving data. Lastly, we will share four enticing technical trade setups in stocks with leading Zacks Ranks.
Economic Data Outlook
This week’s economic docket is fairly light, featuring a series of addresses by Fed members throughout the week. Eleven speeches are scheduled, with four on Tuesday and five on Wednesday.
Key data releases include ISM and PMI services on Monday, US trade deficit and Consumer Credit on Wednesday, and Initial Jobless Claims on Thursday.
Additionally, there are numerous earnings reports, with notable mentions such as McDonald’s Corporation, Caterpillar Inc., and Palantir Technologies on Monday; Eli Lilly and Company, Toyota Motor Company, Chipotle Mexican Grill, and Amgen Inc. on Tuesday; Alibaba, The Walt Disney Company, Uber Technologies, PayPal Holdings, and Yum Brands on Wednesday; and S&P Global, Philip Morris International, and Duke Energy Corporation on Thursday. The week wraps up with reports from PepsiCo, Enbridge, and Honda Motor Co. on Friday.
Broad Market Update
After last week’s FOMC meeting, equities initially faced a modest selloff, followed by aggressive buying, propelling stock indexes to fresh all-time highs.
While the rally’s fervor is unmistakable, a lack of significant pullbacks over the last three months prompts a cautious stance. Nevertheless, this is not a green light for shorting the market. For investors holding winning stocks, it may be prudent to tighten trailing stops in preparation for an inevitable correction.
My focus is on the upward trending channel in the S&P 500 SPY (similar setup in the Nasdaq 100) to gauge sentiment. A break below the lower bound would trigger a more defensive stance, although a test of 5,000 appears quite likely in advance.
Image Source: TradingView
Key developments at last week’s FOMC meeting saw Jerome Powell scaling back interest rate cut expectations. Given the sustained strength in labor and wage markets, the committee conveyed that the prospect of a rate hike in March is diminishing.
Market futures mirror this sentiment. As seen in the FedWatch tool below, the likelihood of a March rate cut has dwindled from 64% a month ago to only 17% presently, while chances of a May rate cut stand at 60%.
A marginally more hawkish Fed stance and potential higher interest rates pose a headwind for stocks until the next meeting in mid-March.
Image Source: CME Group
Technical Trade Setups
In line with recent trends, we bring forth four compelling trade setups. The first pair represents stocks with an aggressive tilt, poised to outperform if the market continues its ascent, whereas the latter duo is more defensive and likely to outperform in the event of a market correction.
Netflix NFLX presents a compelling bull flag post a robust earnings gap up. A trade and close above the $570 level would signal a breakout, while a breakdown below the $561 support level invalidates the setup, prompting investors to explore other opportunities.
Image Source: TradingView.com
CrowdStrike CRWD, the cybersecurity firm, also boasts a compelling technical setup. Over the last fortnight, the stock has carved a clean bullish consolidation. If CrowdStrike stock can trade and close above the $305 level, it would signal a breakout. Conversely, breaching the $290 support level would invalidate the setup.
Image Source: TradingView
