VIDEO: 7 Stocks We are Watching Closely and 1 Flirting With its Panic Point

March 20 (9:12)

In today’s Portfolio video, Chris Versace walks through the market dynamics at play as we close out the trading week.

He also discusses what could lead us to put some capital to work should weekend developments help the market find its footing. With that in mind, Chris shares some holdings the Portfolio is closely watching, one Bullpen candidate that has caught our eye and one holding that is flirting with its panic point.

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Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. Friday, March 20. And if you've looked at the tape, with few exceptions, you can see that stocks are trading lower today. And as I record these comments to you, the VIX back above 26. Looking at the S&P 500 and the NASDAQ composite, both are below their respective 200 day moving averages. And while some oscillators are showing the S&P 500 is moving deeper into oversold territory. When we look at the relative strength index levels, the RSI for both the S&P 500 and the NASDAQ composite, not yet oversold.

However, I will say that the RSI level, again, last I looked for the S&P 500 was around 32. One of the lower readings that we've seen in some time. Now as we think about what's going on today, yes, there are the ongoing headlines and developments on the US-Iran front, the energy markets, all of that. But remember, we also have record triple witching market volume in today, which means we could see some wide swings in the market. Currently we are down. I have to see what happens this afternoon.

But as I think about it, and I talked about this yesterday, I mentioned it in our opening comments today, it is Friday, and with a lot of uncertainty over what could happen over the weekend, potentially something good on the US side in Iran front, potentially further escalation. We are hearing that ground forces might be used to take over certain parts of Iran's shipping, oil shipping capabilities. We'll have to see. We're also hearing that the Democrats aren't likely to support the $200 billion incremental funding ask by the White House and the Pentagon for the current conflict. So a lot of moving pieces.

And I think with that, we're likely to see short-term traders reduce their exposure going into the weekend. Is it possible, as a result, we get some late afternoon flush in the market? Possible. That's something that we'll be watching out for. But at the same time, we are going to want to see what happens with those weekend developments, whether it's something that can help the market find its footing. And if it does, we could potentially do some buying in the portfolio in the coming days.

But here's the thing. When we think about where we might go and put capital to work, we're certainly going to want to balance out where the likelihood for oil prices to settle out will be. And the thinking, remember, is that they could move lower from where they are today or the last couple of days. But where they settle out relative to where they were January and February before the conflict, that's going to matter. The spillover is something that we'll have to contemplate on not only gas prices and what that means for consumer spending, but also diesel prices and other things that we talked about, these other ripple effects that we're seeing.

So we'll have to pick and choose what we're thinking about. We'll also have to understand, depending on what happens over the weekend, what is happening with the Strait of Hormuz. Is it opening? Are ships being let through? What does this mean for the backup of ships to finally pass and begin? And how does that impact potential supply chain disruptions as we think about March quarter results and guidance for the June quarter relative to what the market currently expects.

If you did not read our alert earlier in the week with those six charts that really broke down the consensus EPS expectations for the S&P 500, I would really suggest you do so. We'll be linking to that in our weekly roundup out later today.

But with all of that in mind, and I'm sure there's some questions from at least a few members, and I can certainly guess who you are, let's spend a minute to just think about our shopping list for the portfolio. And I'll start off by saying, first and foremost, yesterday we added shares of Applied Materials to the bullpen. And given that conversation, we are watching the shares very closely, especially if they get closer to their 50 day moving average and deliver a positive support.

Again, please read that alert. I think there's a lot of great information in there and really puts forth why we not only added the shares to the bullpen, but we are at the right price, interested in potentially calling the shares up. And looking at our most recent addition to the portfolio, Netflix, are we inclined to pick up more shares? We are, but we're also mindful of the gap that we see in the chart, as well as support at the 50 day moving average. The gap looks to close right around that 50 day moving average of support 87. And for folks who have questions of, wow, if people are cutting back, are we concerned about what the potential cancelations for Netflix?

And I would say, I think we're more likely to see people trade down from paying full price to the hybrid plan with lower price advertising. And I think that really plays into Netflix's growing effort to deliver ad revenue. And as we know, they have been amassing quite a backlog of that. So I do think that could be very interesting for us on Netflix.

And while Apple is still a relatively large position in the portfolio for folks who are underweight there, keep a close eye. The shares are coming up on their 200 day moving average. There are some positive news out recently about strong iPhone sales in China. That is a positive. Remember, though, the big, big catalyst for us is the eventual release of the AI enabled Siri. We continue to wait for that. Hopefully we'll have some news ahead of WWDC June.

Let's take a look at Eaton, again, for folks who are underweight there. Strong support. The shares are really bouncing on that strong support between the 50 and 200 day moving average. And yes, all we continue to receive is more data and signals about the growing pain point of the electrical shortage. So take a look at this week signals, you'll see what I'm talking about.

United Rentals, boy, the shares are oversold based on their RSI level. And I will concede the MCID indicator. It is becoming interesting. The balance for us though is the pullback that we've seen in the shares, which has been significant, versus the impact of severe winter weather earlier in the quarter, and the fact that we simply haven't seen any major changes to market EPS expectations for the current quarter in the last 30 days. We'll watch this closely as well.

Also American Express. This is an interesting one for us given the pullback. The shares are oversold. Remember a lot of folks are really keying in on the potential crimp in consumer spending. Remember, that is around 30% of the company's revenue. The big picture for us there is the 70% that comes from the card fees and the ongoing refresh with the platinum card. I continue to think that given the environment and the amount of benefits that you get with the platinum card, that more than offsets the price.

I think that American Express could pick up perhaps even a greater number of new members in the current quarter, possibly even the first half of the year. So that's a name that I think that if we see the market find its footing, it's one that we would look to pick up.

Also, for folks who are closely watching Arista Networks, chugging along the 50 day moving average with some close support right behind it at the 130 level. We continue to see this company benefiting from the AI and data center build out, but other things as well. Here's the one though. Microsoft, right at our panic point as I'm making these comments. And I concede we may have some tough decisions to make on this one, especially as we look to increase the portfolio's exposure to the EPS diplomat's basket in the coming weeks. Remember, we're going to take that to 4% up from 2% when we reconstitute the basket.

Now, we'll have a lot more to say on all of this in today's weekly roundup. Remember tomorrow, a fresh batch of portfolio signals. Monday, we'll lead off with an early look at the S&P 500 on a technical basis from Bob Lang. We will also touch on any weekend developments in our key eight items, and I'll likely be discussing those developments on the Schwab Network from the NYSE shortly before the market begins trading on Monday. Be sure to tune in, but we'll also share the video with you as the day's video of the day. With that, my friends, I'd like to go. Please be sure to check back for comments. And I hope you have a great weekend.