Last week was a perfect example of why we don’t take an absolute position until the market makes a definitive statement. Things were setting up for a possible correction with the S&P 500 and DOW charts dangling like some daredevil hanging on the edge of a cliff with one hand. We’ve all seen those “You won’t believe what happens next” clickbait photos online.
If we acted based on what we expected to happen next, the hand of the dangler slipping and the thrill-seeker falling to his demise, we would have made an unforced error. We were prepared for a correction and ready to act if the market lost its grip, but not before.
Instead of letting loose, Wall Street pulled itself onto safer footing and went the other way. The picture is much clearer, and we have a better understand of what’s likely to happen next.
Indexes managed to push through resistance, reversing short-term downtrends. Our leadership, momentum and longer-term market style measuring sticks are in go territory. The market has spoken and has declared its position, bullish, and prices should go higher in the near-term.
How high? That depends on earnings and forward guidance. Most second quarter earnings are in the books with the calendar flipping to July. The floodgates of financial report cards are about to open. If the start is any indication, Q2 could be better than anyone expects.
So far, 14 S&P 500 companies reported their results, with 12 beating earnings per share forecasts and nine topping sales predictions. It’s early, but stocks could fly if the bulk of announcements resembles the start. Reports will continue to trickle in for the rest of this week with the flow accelerating next week.
We’ll be on top of it and highlight companies we believe are poised to beat or bust Wall Street’s expectations.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) was the top performing industry according to our rankings. The ETF is designed to track the performance of US based clean energy companies including manufacturing, development, distribution and installation of emerging clean-energy technologies including, but not limited to, solar photovoltaics, biofuels and advanced batteries.
QCLN broke past its all-time high set in late 2007. In all likelihood, “smart money” is beginning to accumulate stocks they believe could benefit from a Joe Biden presidency. Energy stocks could rise and fall depending on poll numbers with oil and coal more closely following President Trump and green riding former Vice President Joe Biden’s numbers.
Universal Display Corporation (OLED) is one of QCLN’s 43 holdings and, in our opinion, one of the more appealing stocks from a technical and fundamental perspective.
Shares of the organic light emitting diode manufacturer got to the plus side of descending trendline and could be in the early stages of pivoting higher. It would not be surprising to see investors bid the tech company’s price to its 200-day average of $169.08 in the near-term. The stock closed at $153.86 on Monday, July 6th. Universal Display has a 52-week range of $105.11 to $230.32 and analysts peg $170.11 as the one-year price target. (1)
From a fundamental standpoint, OLED is attractive relative to the average company in the First Trust NASDAQ Clean Edge Green Energy ETF.
The display company’s earnings are expected to outpace the portfolio for the next three to five years at 30% compared to 19% for the group; management has delivered an 18.85% return on equity; whereas the typical company’s ROE in QCLN is underwater; OLED has limited to no debt and offers one of the better net profit margins.
May all your longs go up and shorts go down.