Build a Wall and Stocks Won’t Fall
Stocks are stuck in neutral to start the new trading week because investors are worried about the government shutdown and U.S.- China trade negotiations, the financial press assures us.
Like the weather in New England, if you don’t like these dreary headlines, just wait a few minutes…
Futures are soaring this morning after congressional leaders reached an agreement on border security to prevent a new shutdown. All it needs is Trump’s seal of approval. Even though the tentative agreement is more than $4 billion shy of Trump’s original ask for his border wall project, the herd is optimistic this will mark the end of the shutdown feud.
Judging by the market’s reaction, the agreement is a done deal. TV pundits are even looking ahead to a trade deal. Administration officials say Trump wants to meet with China’s Xi Jinping to cut a deal “very soon”, which could potentially squash yet another major worry plaguing the market.
As always, we’ll let price do the talking. Right now, it’s hinting that two of 2018’s most controversial stocks could be setting up for big moves.
First up, Tesla turns the page.
There’s no shortage of controversy surrounding Elon Musk The Tesla Inc. (NASDAQ:TSLA) CEO endured a scandal-plagued 2018. But he’s looking to turn the page this year — and so is Tesla.
Tesla earned an analyst upgrade yesterday that helped push shares higher by more than 2% despite a late-day fade. While the chart is far from perfect, this move keeps the bounce off its higher lows near $280 intact:
When we last checked on Tesla, I mentioned how the stock continues to look constructive this year as the electric car pioneer finally hits its stride following a strange and eventful 2018 performance.
You know the story. Musk stirred up more than his fair share of controversy trolling Twitter with his infamous funding secured claim, only to later claim that Tesla was “within single-digit weeks” of death as the company attempted to ramp up Model 3 production.
But as Canaccord notes in its upgrade, Tesla is looking more stable in 2019 thanks to recent guidance that has “removed significant concerns for both production capability and profitability of the critical Model 3.”
Now if only Elon can behave, Tesla stands a chance at making a serious run this year.
Tesla’s not the only divisive stock grabbing positive headlines this week.
Facebook Inc. (NASDAQ:FB) has also staged an impressive comeback off its December lows. Now the stock could soon get an even bigger boost from Wall Street analysts.
Analysts are slow to react to abrupt changes in the market, MarketWatch’s Mark Hulbert explains. They’re too conservative — and oftentimes refuse to update their forecasts until after a company is well into its turnaround phase.
“This in part is because the noise-to-signal ratio is sky-high; it is unlikely that any particular piece of news has any meaning,” Hulbert writes. “But it’s also because analysts want to avoid the appearance of merely following the lead of the analyst community. So even when they do finally think a revision is warranted, they may wait if many other analysts have already revised theirs.”
Check out Hulbert’s chart:
It’s nice to see the analysts are finally falling in line after leaving this stock for dead just six months ago.
Just a couple of days before the market bottomed in late December, I wrote that the Facebook hate was reaching a crescendo and the stock had a good chance to lead the FANGs out of the gutter when the market recovers.
The bulls now have a chance to seize control of Facebook shares now that the stock is hanging tight to its earnings gains. A move above $172 could trigger the next breakout.
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