Week 48 Stock Watch

Two stocks to add to your watchlist are NVDA and MS. Read on to know why.

Nvidia’s lustre holds ahead of earnings

Shares in Nvidia Corp (NVDA) have performed well in November so far, gaining nearly $100 to $489. This price is close to the all-time highs reached in August. The main upcoming event likely to affect the price further ahead is Nvidia’s earnings report for the fiscal third quarter, which is expected after hours on Tuesday 21 November.

Based on earnings reports earlier this year, it’s likely that participants will focus strongly on mentions of AI in the call. That means there could be another strong gain after earnings. NVDA is one of the relatively few major shares that has consistently outperformed in 2023, with summer having been mostly a period of consolidation after the second quarter’s manic gains.

Although the actual dividend is likely to remain a meager 4c, many holders of Nvidia’s stock don’t care much about dividends, while the narrative of overvaluation isn’t very strong considering actual performance year to date. Any significant negativity at earnings seems to be unlikely barring truly surprising results.

The technical picture presents some challenges for potential new buyers, the main one currently being very strong buying saturation. Positive news about new GPUs in the week before earnings helped to propel the price up further, with all four of the moving averages now lower and the next psychological resistance of $500 in sight again. 

Short-term buyers seem to be better placed than those looking at weeks and months because another rejection might be possible around that resistance. However, a breakout could signal a new phase of the uptrend.

Morgan Stanley continues to face challenges

Shares in Morgan Stanley (MS) reached a low of nearly two years late last month slightly below $70. Morgan Stanley suffered the largest recent decline in revenue from investment banking of the American financial sector.

Apart from a weak performance by investment banking and the long-running federal investigation into block trading, sentiment on financial shares, in general, has been weak for much of 2023. Public perceptions of the significant gulf between rates for saving accounts and mortgages have been damaging. Nevertheless, Morgan Stanley’s forward ratio of price to earnings at around 11 is quite attractive, and looking at the longer term it has also outperformed all of its peers except JP Morgan Chase since the Global Financial Crisis.

On the chart, downward momentum has been lower recently and the price recovered somewhat from lows at the end of October. The main technical reference now seems to be the 20-day simple moving average. In the medium term, waiting for a potential double bottom before buying would be a conventional approach, but buyers convinced of a return to $100 sometime next quarter might still have a good ratio of risk to reward with an entry around the current area. With no information yet about the next earnings report, regulatory issues, and overall performance remain key fundamental factors for MS.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Michael Stark

Michael has been investing in shares and currencies for 12 years, with a focus in the past seven specifically on CFDs. As an associate of the Society of Technical Analysts, Michael's primary concentration is on charts and indicators. His goal in educating traders is to simplify matters wherever possible and help them find their 'aha!' moment when they achieve what they're looking for from speculation with CFDs.