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Week of March 16, 2020
There is hope markets could stage a sizable rebound.
Just a day after the steepest declines since Black Monday 1987, markets exploded on hopes for stimulus. “The turnaround comes as central banks from U.S. to Australia pump liquidity in the financial markets and as investors become hopeful that U.S. Democrats and Republicans could pass a stimulus package on Friday,” said Fiona Cincotta, analyst at City Index, as quoted by CNBC. “Washington may be late to the party, but they are still more than welcome.”
However, conditions are likely to remain extremely volatile, as the virus continues to make its way around the world.
“I wish I could tell you that I see calmer waters in front of us, but I do not,” Mohamed El-Erian, chief economic adviser at Allianz Global Investors, told FOX Business. “Waters are going to get even choppier. You have a lot of trapped longs. You have a lot of redemptions going on from ETFs and going on from mutual funds. So, I’m afraid it’s going to get even more treacherous in the next few days and weeks.”
With the pullback, many stocks have become extremely oversold, and could eventually be some of the best “blood in the street” opportunities.
Opportunity No. 1
Royal Caribbean (RCL)
Some of the hardest hit stocks on the virus story were cruise lines. However, the sell-off appears to be overkill at this point. Technically, RCL is too oversold to ignore. For one, it hasn’t been this cheap since 2016. It’s oversold at its lower Bollinger Band, with excessive over-extensions on RSI, MACD, and Williams’ %R. Once the virus fear fades, we’d like to see a bearish gap refill around $105 on RCL with patience.
Opportunity No. 2
Advanced Micro Devices (AMD)
AMD has become excessively oversold at its lower Bollinger Band (2,20) with over-extensions on RSI, MACD, and Williams’ %R. Better, the company just reiterated its first quarter and 2020 revenue guidance of 20% compound annual growth through 2023, says The Street.
Opportunity No. 3
JetBlue Airways (JBLU)
Airlines have taken some of the biggest hits with declines in travel. While further downside may be likely, JBLU is becoming difficult to ignore as it becomes aggressively oversold. It’s worth watching for entry at current prices.