As the market attempts to find its footing after a spirited end to 2023, thus far in 2024, the two leading sectors are, first, the Financials:
And then, secondly, the Biotechs (note, a view of the long-term monthly shows biotech stocks exactly where they were 9 years ago).
Four financial stocks stand out as trade ideas for next week.
Within the brokerage arena, the set ups in both Goldman Sachs Group, Inc. (GS) and Jefferies Financial Group, Inc. (JEF) look appealing.
Jefferies announced two biotech IPO deals late Friday night. We believe both companies will enjoy banner years as both IPOs and Secondaries accelerate with the Fed finally out of the way.
(Note: we will be using a staggered stop of 3-5% in all of the following names for the week ahead should we get filled on any of these names in highlighted areas of interest)
In JEF, any flush to former important resistance at $38.5 should now serve as an important zone of support we would like to buy into:
As for Goldman, dips back toward the 20-day SMA look attractive to us:
Both setups are particularly attractive, not just because of their impressive relative strength in the current market weakness, but also because of the multi-year base each stock is emerging from.
As technicians say, the bigger the base, the bigger the move:
Banks kick off earnings season at the end of next week. Citigroup, Inc. (C) and JP Morgan Chase & Co. (JPM) are the clear leaders. JPM is too extended to do buy right now. C, however, is interesting to us.
Last week, Wells Fargo adjusted their PT on the stock from $60 to $70 on the thesis that Management’s recent moves to streamline the company should make the bank simpler to manage and more profitable over the long term.
C looks actionable on dips back to prior resistance, now support, at just below $52:
Within credit cards, American Express Co. (AXP) has inflected and seems poised to extend to all-time highs. Any move down to $180-$185 looks attractive as a buy-the-dip zone this week:
Turning to Biotech, while the group has yet to make 52-week highs, a few new leaders within the group have already sprinted to all-time highs.
Vertex Pharma Inc. (VRTX) looks good on dips to the $408-$410 area this week:
As for Amgen, Inc. (AMGN), any dips to $295-$300 look actionable:
In 2020, Longboard Pharma Inc. (LBPH) was spun out from Arena Pharma. After releasing best-in-class results for its compound which showed efficacy in a number of different epileptic disorders, LBPH sprinted to all-time highs and finished the week strongly after completing a 10M share deal at $21.
I like dips to $23.75-$24.5 early in the week. I plan to scale out of my position in the $28-$30 price zone.
Within the small-cap arena, Globalstar Inc. (GSAT) powered to new highs late in the week. Investors are clearly anticipating monetization moves by the company’s new CEO, Paul Jacobs - formerly the CEO of Qualcomm - who came on board last August.
Strong multi-year base here with big resistance in the high-$2s. Any flush to $1.95 looks actionable:
On the short side, Apple, Inc. (AAPL) looks particularly vulnerable. With channel checks showing a muted reception to the company’s latest iPhone offerings, along with decreased traction in China, there is a huge disconnect between where Apple is currently trading and where it should be trading in my humble opinion.
Considering Apple may be challenged to even grow their earnings mid-single digits this year, its financial performance certainly does not warrant a 30x P/E multiple:
Pull-ups in Apple back to its 150-day SMA should serve as a good entry zone on the short-side next week:
With many stocks needing time to form right-stage bases and additional time likely needed for demand and supply to come into equilibrium, I am running my book very tightly and with very small size at this point.
I am researching a number of names that have strong potential to be top-tier inflections. But, as is often the case, it’s best to be vigilant and disciplined and wait for the best inflection points to reveal themselves to us in the coming weeks.
Next week should be busy with CES, the JPM Morgan Conference and with select banks opening the earnings spigot.
Enjoy your weekend in the meantime and rest up for what should prove to be another busy earnings season on the way.
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Disclosure: We are long (or will soon be long) AMGN, AXP, C, GS, GSAT, JEF, LBPH, VRTX in the accounts we oversee.
Disclaimer: In no shape or manner should the views expressed in this piece be considered investment advice. We reserve the right to change our positioning in these names at a moment’s notice without updating you on any such change in opinion and positioning.
Investors need to consider their investment risk tolerance before investing in the stock market and also before investing in any of the stocks mentioned in this report.
