US Markets Round-Up

This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a marginally positive note and later gained bullish momentum. The index made a high of 2356.732 during the week and settled at 2354.280 with a week-to-date (WTD) gain of ~2.80 percent on July 28, 2022. Other major indices such as S&P 500 and NASDAQ Composite also witnessed bullish momentum for the week. On July 28, 2022, the S&P 500 index settled at 4072.430 with a WTD gain of ~2.80 percent, while the NASDAQ Composite Index settled at 12162.593 with a WTD gain of ~2.78 percent.

As per the advance estimate by the Bureau of Economic Analysis, the GDP decreased at an annual rate of 0.9% in the Q2 of 2022 compared to a decline of 1.6% in Q1 of 2022. As per the U.S. Department of Labor, the initial claims numbers decreased to 256,000 from 261,000 (revised level) in the prior week and supported the indices. Notably, the Federal Reserve increased the interest rate by 75 bps in the latest policy meeting to tackle inflation.

Having understood the US market performance over the week, taking cues from major global news, and based on technical analysis of the Russell 3000 index for the upcoming week, now let’s have a look at the one NYSE listed stock to pick from the technical standpoint. Noted below recommendation is based on the entry price, target prices, and stop-loss for Silvergate Capital Corporation (NYSE: SI) for the next 2-4 weeks duration: 

Silvergate Capital Corporation 

Silvergate Capital Corporation (NYSE: SI) is a United States-based holding company for Silvergate Bank. The Bank is a provider of monetary framework arrangements and services for the digital currency industry. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

SI's prices recently broke a falling wedge formation by an upside and are 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, further supporting a positive bias. Now the next major resistance level for the stock appears at USD 108.00 and prices may test this level in the short-term (2-4 weeks). A further movement above USD 108.00 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the leading indicator RSI (14-period) is recovering from the lower levels and showing a reading of 48.88, indicating positive momentum build-up at the current levels. The volumes seem supportive for the next upside movement. However, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as the resistance levels in the near term.

General Recommendation

As per the above-mentioned price action and technical indicators analysis, Silvergate Capital Corporation is looking technically well-placed on the chart, and a ‘Speculative Buy’ recommendation has been given on the stock. Investment decision should be made depending on an individual’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 recommendation is as follows:

Markets are trading in a highly volatile zone currently due to certain macro-economic and prevailing geopolitical tensions. 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:

Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the 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, social and political instability risks etc.

Note 1: Individuals 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

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. This report is based on ~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. Individuals can Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. Individuals 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, currency, technical indicators, support, and resistance levels is July 28, 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 individuals. Technical reports in general chart out metrics that may be assessed by individuals 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.

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