4 Stocks Worth Looking at in May
May 18, 2021 (Investorideas.com Newswire)
Making Sense of the Financial Markets Right Now
Heading into June 2021, US financial markets have posted anemic 1-month returns, with the strongest performer being the New York Stock Exchange Composite Index at around 1.12% (May 17, 2021). All the other major US indices have fared considerably worse. A combination of factors has coalesced, resulting in a risk-off approach to equities in May. Yet, despite the short-term bearish movements, the 1-year gains for US markets remain impressive. The Dow Jones, S&P 500, NASDAQ, and NYSE are all up between 44% and 49%, in line with the majority of markets in Europe, the Middle East and Africa, and to a lesser degree the Asia-Pacific region.
In the US, a combination of factors (pro and against) equities are now working the markets. These include inflation concerns, rising coronavirus cases in certain parts of the world (India, Brazil, South Africa et al), economic stimulus efforts, poor jobs reports, and the prospect of a broad scale reopening of the global economy. Viewed in perspective, these macroeconomic variables are pushing and pulling against equities all the time. On a positive front, equities are being boosted by rising oil prices. Dubbed the bellwether of economic activity, rising oil prices tend to suggest increasing demand for crude oil - a positive economic indicator.
As at May 17, 2021 the MSCI world index of global stocks has improved 22% since 23 January, 2020. This is a significant improvement which gives momentum to the equities rally that began in April 2020. The Federal Reserve Bank - based on the April jobs reports - indicated that much work remains to be done regarding full employment and inflation forecasts. As such, the asset buying program of the central bank will continue in earnest. Most of May has been beset by a tech stock sell-off. The US dollar index fell, as dollar weakness persisted and exporters across the country benefited from a weaker USD.
While equities are volatile propositions heading into June, some top stocks to watch include the following:
Coinbase Global (NASDAQ: COIN)
Coinbase (NASDAQ: COIN) is currently trading around $245 per share, with a market capitalization of $50.767 billion. The 52-week trading range of this new stock is $238.25 on the low end, and $429.54 on the high end. When this leading cryptocurrency exchange listed, traders and investors had lofty expectations, but it ended up trading like Facebook did, with horizontal price movements, and rapid declines following its IPO.
The crypto market has endured multiple setbacks and selloffs following Tesla CEO Elon Musk's repudiation of Bitcoin in the second week of May 2021. According to Musk, Bitcoin will not be permitted for the purchase of Tesla vehicles, since it is not an eco-friendly cryptocurrency. Musk admitted that he would not be selling BTC, but the announcement nonetheless was bad for the digital currency market. From around $58,000, Bitcoin is now trading around $43,000 (May 17, 2021), and falling fast.
Much the same is happening with many other altcoins. While Coinbase is not a cryptocurrency, its success is largely dependent on the attractiveness of cryptocurrency to retail and institutional traders. While the stock has trended bearish since inception, there have been a few upswings, albeit short-lived. The technical indicators (Bollinger Bands) suggest that Coinbase is oversold, since the spot price is below the level of the bottom Bollinger Band. This presents as an opportunity to buy the dip.
DraftKings (NASDAQ: DKNG)
DraftKings is an interesting stock. It represents the sports betting industry in the United States, particularly in New Jersey. The stock has taken a big hit of late, part of a broader tech stock sell-off on the NASDAQ. From around $59 per share, it has dropped to around $43 per share, with a small bounce since then. The technical indicators reflect that a price of $43.13 (May 17, 2021) remains higher than the bottom Bollinger Band of $39.49. As long as a crossover doesn't occur, the stock is priced okay, not subject to a sudden reversal which would happen in oversold territory.
Many savvy investors believe that DKNG is ripe for the picking now, after the sell-off. They maintain that widespread regulation of sports betting is likely to take place in the future. When that does happen, DraftKings stock is likely to go through the roof. There is no timeline for nationwide sports betting regulation, but the presumption thereof is sound.
Microsoft (NASDAQ: MSFT)
Microsoft co-founder, Bill Gates may be going through a nasty divorce, but the stock shows no signs of being persona non grata. The technical indicators remain bullish, with a spot price of $244.79 in between the upper and lower Bollinger bands of $238.82, and $264.84. It is neither overbought nor oversold. The tech stock sell-off of May impacted Microsoft, as evidenced by the declines of late.
Nonetheless, Microsoft Corporation is regarded as a technical sell, with oscillators and moving averages. With oscillators, the Momentum 10, and MACD 12, 26 are sells, while the 10-day EMA, 10-day SMA, 20-day EMA, and 20-day SMA are all sells. Slight consolidation of late indicates stabilization around $244. There are plenty of new acquisitions in the works for Microsoft, and the virtual work environment is certainly benefiting the company.
Peloton (NASDAQ: PTON)
Peloton (NASDAQ: PTON) has seen plenty of whipsaw price movement in recent days. The stock is still short-term bullish, based on moving average convergence divergence patterns. The company has a market capitalisation of $26.808 billion with a 1-year target estimate price of $129.79 (Yahoo). While the stock is considered overvalued, it has posted earnings beats in Q2 2020, Q3 2020, Q4 2020, and Q1 2021. The revenue has grown markedly since 2017, reaching $1.80 billion + in 2020. In terms of recommendation trends, PTON is rated at 2 on a scale where 1 is a strong buy and 5 is a sell.
Unfortunately, there was a class-action lawsuit against Peloton Interactive Inc, owing to materially false statements to the effect that the company's Tread+ product presented as a safety risk to small children and animals. After a child died and many injuries resulted, the company did not act in good faith and failed to recall the products, or suggest a halt to its usage. Depending on how well the company's messages are received by the public, and how well safety is prioritized, the stock may move either way.
*Equities charts, and price movements are dynamic. The push and pull factors acting on pricing can affect stock prices from day to day, hour to hour, or minute to minute. The information presented here with is not to be taken as trading advice, or suggestions. It is merely analysis of price performance at the time of writing.
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