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Oct 26, 2022

Top 4 Stocks to Watch in November 2022

By:Ryan Sullivan

Market Update

The E-mini S&P 500 Futures displayed support in the $3,540 to $3,580 range. We have since rallied to $3,850 and are continuing to go up. Trading from late September to present has developed a constructive stance. The price action from $3,580 to $3,780 over the last four weeks has shown that buyers are interested at this level. As a result, we are now rallying to $3,900. 

The $3,850 to $4,000 range for the E-mini S&P 500 Futures feels comfortable right now. This range is comfortably above 2022 lows but still down 18.34 percent from the opening price of 2022. 

From the current price of $3,893, we will either continue up to $4,000 and test resistance, or we will pull back to test support in the $3,740 to $3,800 range. Some chopping around is likely as the market plays out the battle between traders that think we are going higher and traders that think we are going lower in the near-term. 

monthly price changes spy gld qqq tlt
Fig 1. Six-month price percent change for SPY, GLD, QQQ, and TLT

Top Stocks to Watch in November

  1. Uber Technologies Inc (UBER) – November 1
  2. Draftkings Inc (DKNG) – November 4
  3. Nvidia Corp (NVDA) - November 16
  4. Jd.Com Inc ADR (JD) – November 22

Fig 2. Six-month price percent change for DKNG, UBER, JD, and NVDA.

Uber Technologies Inc. (UBER)

Earnings Date: November 1st (Before the open) 

Uber is currently trading at $28.79, down 32.24 percent from its opening price of 2022. From May through July of 2022 Uber developed a base price between $20.50 and $25. The price action this month retested this base support range and was rejected in mid-October. 

The last five quarters of earnings reports for Uber have shown growing sales year over year. Net income was negative for three of those five quarters. Uber’s negative net income was five times larger than its positive income over the last five quarters. 

Over the same period Uber’s total assets dropped by about 13 percent and total liabilities grew by about 4 percent. It appears that Uber has continued to try to limit its costs while allowing sales to recover from the Covid-19 lockdowns.  

Uber’s current price is about where it was when it opened after reporting earnings last quarter. If Uber can report positive net income or continues sales growth, price will likely have a reason to move higher. There is an opportunity to play Uber neutral-to-bullish going into earnings on Nov. 1st.

Draftkings Inc. (DKNG) 

Earnings Date: November 4th (Before the open) 

Draftkings is currently trading at $15.07, down 45.93 percent from its opening price of 2022. Since mid-May DKNG has been posting higher highs and higher lows. If the market does not break lower, there will have to be a very good reason for DKNG to break below $12 again this year. 

Draftkings’ earnings reports over the last five quarters have not been spectacular. For the last five quarters DKNG has reported negative net income. Sales slightly increased over that same period, from about $297 million to $466 million. 

Draftkings represents a new generation of gamers that do not want to bet on sporting events in the traditional manner. DKNG is well positioned to develop the gaming industry in states that are opening up to online gaming by offering traditional sportsbook betting along with daily fantasy betting. 

DKNG’s current price is about $3.00 lower than its opening price after earnings last quarter. A neutral strategy will likely be opportune since DKNG’s upside is limited by regulation and price has already been beaten down in 2022.

Nvidia Corp (NVDA) 

Earnings Date: November 16th (After the close) 

Nvidia is currently trading at $129.37, down 56.57 percent from its opening price of 2022. Since November of 2021 NVDA has been in a bear trend, posting lower lows and lower highs. The most recent near-term bottom, around $110, was a strong rejection but it did not build enough of a base to say that price action will not go lower. 

Nvidia’s income statements over the last five quarters have been okay. Net income was around $2.5 billion for three quarters and then fell the last two quarters to about $656 million. Sales oscillated during the same period, starting at $6.5 billion, rising to about $8.2 billion, and then back down to about $6.7 billion in the last quarter. 

NVDA’s balance sheet over the last five quarters has remained consistent with slight growth. Total assets grew from about $38.6 billion to $43.4 billion. Total liabilities grew from about $17.5 billion to $19.6 billion. Positive net income, positive sales figures, and proportional balance sheet growth are what we want to see. 

If NVDA can report net income greater than last quarter, with sales in the same ballpark, it is likely that investors will want to accumulate NVDA stock given the last ten months of bearish trading. Nvidia’s technology and consumer base is strong, and if they can deliver their products to market, they will have sales to continue growing. 

Neutral short premium earnings plays will give great exposure to being short the volatility that exists in NVDA right now. Out of the money short put spreads will also play here if you would like to lean bullish going into earnings. 

Jd.Com Inc. ADR (JD)

Earnings Date: November 22nd (Before the open) 

JD is currently trading at $41.86, down 39.25 percent from its opening price of 2022. For most of 2022, JD price action has moved sideways with short periods of price spiking up and down. Those spikes were quickly reeled back in.  

However, since the beginning of September, we have been in a steep bear trend. The selloff since September has been aggressive, culminating in the recent bottom we recorded on October 26th, 2022. Although this rejection around $35 is strong, it did not develop enough of a base to confidently say price will not go lower. 

As an online retailer, JD’s profit margins are narrow. Over the last five quarters JD has reported sales between about $34 billion and $45 billion. During the same period sales figures ranged from about -$798 to $653 million. Over the last five quarters JD’s balance sheet grew consistently. Total assets grew from about $73.7 billion to $82.6 billion, and total liabilities grew from about $35.3 billion to $45.1 billion. 

Since sales have not followed a positive trajectory over the last five quarters and three of those quarters reported negative net income, it is understandable why price has fallen recently to where we are now. If JD reports a surprise beat, we should see price shoot back up.  

If we see more of the same in this coming earnings report, we will say where we are or move lower as the market loses confidence in the near term. Defined risk strategies may be a smart choice for earnings plays in JD next month.

 

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