Top Trade Ideas - October 2nd
As Q4 gets underway, we highlight the top watches going into the first week.
Welcome to Q4. Good news: US stocks typically post their best returns in the final quarter of the year. Bad news: the focus of that sentence is on the word ‘usually’. There are no guarantees of the often quoted ‘Santa Rally’.
A review of S&P 500 performance since the index’s inception in 1957 found an average Q4 uptick of 4%. In years when performance in the first three quarters came in at or above where we sit year-to-date, index moves in the final quarter were positive in all but three instances, with the October 1987 stock market crash making that year an outlier. See chart below.
Last week’s S&P 500 left a bullish weekly hammer candle, high volume, and a hold above the 200-day EMA. So, on a technical basis, the week ahead has the potential to see some recent gains reversed.
The US Dollar marched on last week, with US yields continuing to move higher. Despite core PCE inflation meeting expectations at 3.9% and US equities showing some backbone, the DXY finished above 106 and close to 12-month highs.
The fresh start to a new quarter is also lining up with plenty of stocks hovering on support levels. This week’s ideas focus more on these wider moves for the quarter, and we will return to shorter-term ideas next week.
AMD has been in a wedge formation for the whole of last quarter. Last week, the 200-day MA held well, taking price back towards the upper resistance. A break higher could see a large move. The longer the consolidation, the bigger the move.
TRADE IDEA - PLAY THE WEDGE BREAKOUT
Stop Loss: 92.00
Take Profit: 122.00
CRM double bottom, anyone? This is an interesting name. A strong breakout earlier this year failed to hold in Q2. However, the psychological level of $200 (which was also previous resistance in April) is holding strong. We think the risk/reward is here to take this name long, risking a break below.
TRADE IDEA - SALESFORCE $200 HOLD
Stop Loss: 195.00
Take Profit: 216.00
The rest of today’s article highlights three more very popular equity names that have technicals indicating to go long. We then turn to the FX and commodity markets to share our thoughts on what moves we are on the lookout for.
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