Well folks, the economic paradigm that markets live within has shifted from having extremely loose financial conditions to very tight ones at record speed - equities have had a hard time adjusting and the road is unclear as volatility and inflation only compound the situation further; that said, while long term investors need to be wary and tactical, traders are living in paradise. Keep reading for new perspectives and ideas on how to profit from these times as we enter the 6th week of the Coachman’s Report!
"As long as we persevere and endure, we can get anything we want."
- Mike Tyson
Investors are reaching an inflection point for markets as a downward price channel has been established since the S&P 500 hit an all-time high in early 2022, and is now squeezing and positioning the broader market for a breakout above or below the trend. Looking at the chart, while the 200-day moving average crossed below the 50-day about 2 months ago, with no discernable sellers or buyers in control, it could go either way. However, in support of a bullish thesis, the trend broke below support and buyers quickly rejected this lower level, bringing $SPY back into the 4000s. Moreover, volatility has gradually returned to sub-30 levers, settling at 28 to end the week. While that is all in favour of a continued market rally, it is worth noting that the gap between the 200 and 50-day moving averages has been widening, indicative of a sustained bearish trend.
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Long: F45 Training Holdings Inc ($FXLV-NYSE) | Timeline: 3-5 days
F45 Training Holdings Inc is a fitness powerhouse which operates a whopping 1750 locations across 45 countries, with the largest concentration of fitness centres located in North America and Australia. As covid surged during the early months of 2022, businesses across North America postponed return to office plans, this, combined with increased fears of the virus has meant that consumers were less adventurous than predicted during Q1. Although it must be said that gyms often profit from their lack of attendees who still retain their memberships, as they can offer more individualized services for a lower cost. USA Today has reported this number of unused memberships to be as high as 67% (Source).
For a brief history of the price action of this stock, after IPOing in July of 2021, the stock has been routinely battered by each new wave of the pandemic, and after seeing a resurgence in February, reaching all-time highs, the stock has tumbled down to its current trading price of $6.52. As a warning to potential investors, if reported earnings are lower than the analyst expected 0.14 EPS, the stock could see another decline in price. Personally, I believe this company is extremely undervalued considering the number of locations diversified across such a large market base, and as we begin to re-emerge from what is (ideally) the last wave of the pandemic, they could see a wave of new signups looking to rid themselves of their stay at home induced love handles.
Long: Hologic, Inc (HOLX:NASDAQ) | Timeline: 5-7 days
Hologic, Inc. (HOLX) develops, manufactures, and supplies diagnostics products, medical imaging systems, and surgical products for women's health through early detection and treatment in the United States, Europe, the Asia-Pacific, and internationally. The company has experienced a number of different bullish catalysts over the last week, making for a great opportunity for us traders. Starting with earnings and revenue, Hologic was able to beat analysts' estimates for Q1 by 29.54% and 11.39%, respectively, and just a few days later, the company announced the FDA Approval of Aptima® CMV Quant Assay for Human Cytomegalovirus, giving investors even more confidence in the stock as we enter Q2 2022. Taking a look at the chart, Hologic has recently broken out of a double-bottom as well as its price channel, with plenty of momentum leading up to the stock's previous resistance of $80 per share. Moreover, the RSI has bounced back from oversold levels with strength as bulls continue to run with the company’s outlook and positive news, but watch out for a sharp increase in price as it could lead this indicator into risky territory. Last but not least, recent price action has brought the 50-day moving average above the 200-day moving average, forming a golden cross - an extremely bullish psychological signal ensuring an upwards trend.
Earnings Calendar Preview
Chart of the Day: HK Foreign Currency Reserve Change %
As Hong Kong’s new management becomes increasingly unfriendly towards US interests and their monetary policy diverges, there have been renewed fears that the HKD will de-peg from the USD. As shown below, the previous months mark a $25Bn outflow from Hong Kong’s foreign currency reserve charts, one of, if not the highest outflows on record. If taken off of the US peg, the currency could see immense volatility and downward pressure, a dream scenario for a savvy short-seller.