Signals · theoretical, educational setups
Software Breaks Away From Chips, Netflix Into Earnings, Gold Miners at the Midpoint
A second set of theoretical setups for October 16: Salesforce after its best day in a month while chip stocks kept falling, Netflix at a four-week high four days before its results, and the gold miners ETF after a 4.4% drop and a 4.3% recovery on consecutive days.
CRM · Salesforce — Bullish, Swing (1-4 weeks). Salesforce rose 4.57% to $246.74 on October 15, its highest close since September 16, on a day the semiconductor ETF fell for an eighth straight session. It has now closed higher in six of the last seven sessions, up about 10% from the October 7 low of $224.56. A software stock gaining while chipmakers lose is the kind of relative strength that tends to persist when money rotates inside a sector, and falling Treasury yields help companies valued on long-dated subscription revenue. Theoretically, that favours a move toward the September highs. A daily close below $233.92, the October 12 close where the latest leg began, would invalidate the setup. Risks: the stock is still down for the year, a rebound in chips could pull money back out of software, and a renewed rise in yields would hit long-duration stocks first.
NFLX · Netflix — Bullish, Short-term (days). Netflix rose 2.89% to $72.61 on October 15, its highest close since September 21, breaking above a week of closes between $70.30 and $70.61 ahead of its third-quarter report on October 20 after the close (consensus EPS about $0.82). Stocks that are down sharply for the year — Netflix is about 23% lower since January — often attract buyers into a report when expectations look low. Theoretically, that favours further gains into the release. A daily close below $70.30, the bottom of last week's range, would invalidate the setup. Risks: the earnings report itself is a binary event that can gap the stock several percent either way, the company no longer reports subscriber numbers, and a short-term setup into earnings should be closed or sized for that gap before October 20.
GDX · VanEck Gold Miners ETF — Neutral, Short-term (days). GDX fell 4.40% to $83.40 on October 14 and rose 4.34% to $87.02 on October 15, ending almost exactly in the middle of its two-week range between $83.40 and $89.28. Gold itself is drifting near $4,200 with the dollar index off its one-year high, but the miners move two to three times as much as the metal, in both directions, and two such days in a row say more about volatility than about direction. Theoretically, the better setups come at the edges: a close above $89.28 would suggest the rebound has legs, a close below $83.40 that Wednesday's sell-off was the start of something larger. Until one of them breaks, the setup is neutral. Risks: a sharp move in the dollar or Treasury yields around the October 28 Fed decision could push the ETF out of the range in a single session.