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AWC is moving aggressively higher, with the stock having rallied 37% since late November. In the short term however, AWC is finding buyers on the back of Indonesia banning certain mineral exports. It’s worth pointing out that the ten-day RSI is now at 85, which is effectively the most elevated I can see in many years. The stock is also trading around three standard deviations above its 20-day moving average. One could say the stock is overbought given these metrics, however it shows real strength behind the price action and therefore dips could present themselves as a buying opportunity.
Fundamentally it’s hard to get too excited by this name given its flat earnings and revenue profile over the coming years, although its long-term trend is higher. Trading on 16x 2014 earnings, the stock is trading on a 14% premium to its five-year average. However from a macro perspective GE sources its revenue from so many different geographies and areas of the economy that the narrative from the company is always worth listening too. GE has also beaten earnings on ten of the last 12 quarters. GE report pre-market tonight.
There is a fair bit of event risk for traders to look out for with a number of Q4 earnings and economic data releases. GE and Morgan Stanley will be the earning drivers, while on the data side we get December housing starts, building permits, industrial production, and University of Michigan confidence due. We also get to hear from Richmond Fed president Jeffery Lacker, who is very much on the hawkish side of the Fed’s hawkish/dovish bias, although Mr Lacker has spoken a number of times of late, so his thoughts are known.
It’s interesting to see the July uptrend give way of late and price action is growing more and more bearish. The MACD on the daily chart has broken and accelerating from the signal line, while the RSI is showing better weakness in the price. I would stay short for a move to key horizontal support around 1.6250. On the docket tonight we get December retail sales and the market expects a 3.2% gain here, so a weak number will add to the growing signs that cable could see better downside this year.