Coronavirus Wuhan or now call COVID-19 is on the top of everyone’s mind right now. Instead of pretending to an economist, I will give a technical view of the stock market since the Virus and what are the possible sectors and stocks you should be looking at.
First, let’s talk about the biggest market in the world: the US stock market.
Below is the SP 500 chart:
The earliest reported symptoms occurred on 1st December 2019, S&P500 has actually risen since the virus. From this, we can see the market rather resilient to this. But how about the Chinese market?
*China A50 since the COVID-19 Virus*
The China A50 has dropped since the high of 14th Jan 2020, but has since rallied about 50% which is a Fibonacci retracement level.
I think it is possible for the short-term, that we have another leg down to test the low in February.
However, I don’t think it would break the lows unless the situation worsens from here.
Next, what are the US sectors you should consider for trading?
Over here, I am not going to give the usual, buy healthcare, pharmaceutical and sell retail and services kind of advice. Though it sounds logical somewhat. Let’s take a look at what is actually happening 1 week or 1 month ago vs the price now.
The strong sector from the last 1 month is still the technology sector.
However, for the energy sector, it has dropped significantly. As the saying goes, the trend is your friend, I think going forward, this trend will still remain. Energy may continue to remain weak vs the other sectors.
For the global sector, it is just a slight difference, utilities sector is the strongest sector, fund managers are more defensive now and preparing for the worst.
Lastly, what are the stocks we should look at to buy or sell? Below are the list of stocks. These stocks are ranked according to their strength vs the index in the last 1 month. One thing you have to note is that you still need to have some selection process to choose which stocks to buy or short.
As you can see on the right side of the chart it shows the number of arrows. Those that already have a good number of arrows are probably a little too late in the trend. Eg: Tesla ( 17 arrows).
So in conclusion, looking at the market now. This COVID-19 virus does not look like it’s affecting the market much as of yet. If the situation does worsen, the market may still continue to rally ahead. This is the view as of 13th Feb.
Sector-wise buy tech or utilities, sell oil.
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So back to the Tesla share price, hold on to Tesla if you already bought and wait for a dip around $540 to get in you have not bought any.
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