Analysts Say Buy These Market Titans But Should You?

T Buy and sell stockgetty he recessionary fears spiked again last week and helped drop the Dow Jones Industrials over 600 points last Wednesday. In a weekend article, it was reported from JPMorgan’s trading model that “seven of nine asset classes from high-grade bonds to European stocks now show less than a 50% chance of a recession.” However, S&P 500 suggested less bullishness as they have a 75% probability of a recession. That was consistent with last week’s skepticism over the stock market rally so far in 2023. Individual investors do not seem to be as bearish as last Thursday’s survey from the American Association of Individual Investors (AAII) showed that the bullish % rose to 31% up from 24% the prior week. The bearish % also declined well over 6%. Many investors look to analysts’ buy or sell ratings to help them determine what stocks to buy or sell. These ratings are regularly reported in the financial media but in my experience, they seem to be based more on fundamental than technical analysis. Since fundamental data in my view often lags the price data there are generally very few recommendations to sell. Often stocks that look positive to me on a technical basis are given a “sell rating” which can provide a lower open and a good entry point on the long side. A recent segment on financial TV spurred my curiosity about how analysts rated two beaten-down, widely held stocks, Microsoft MSFT (MSFT) and Tesla Motors (TSLA). Microsoft (MSFT) Tom Aspray – ViperReport.com Microsoft (MSFT) reports earnings after the close on January 24th. According to CNN Business 40 analysts have a buy on the stock, 8 have it rated as outperform while 4 have it on hold. From Benzinga, 17 have it rated as buy, 5 rate it as overweight, 3 have it as hold and one has it rated as a sell. Their highest 12 month price target is $365, with a low of $212 and a consensus price target of $280.46. MSFT closed Friday at $240.22. MSFT peaked at $346.42 in November 2021. At the early November low of $212.83 it was down 38.5% from its 2021 high. Even though the overall market has started off the year on a positive note MSFT has so far failed to move above the monthly pivot at $245.87. The declining 20-week EMA is at $244.40 with the monthly pivot at $245.87. A strong close above this level could trigger a rally to the downtrend, line a, at $262.60. The weekly relative performance (RS) has been in a downtrend, line b, for most of the past year as it has declined 22.7% over the past 52 weeks. The RS has risen over the past two weeks but it is still well below its declining WMA. That is a sign that MSFT is still weaker, not stronger than the S&P 500. It needs to move above its WMA and the December high to improve. The weekly on-balance-volume (OBV) turned negative at the start of 2022 (see arrow). It has been in a solid downtrend, line c, but did move briefly above its WMA in August. It is a sign of weakness that the OBV has made a series of lower lows since it turned negative. Tesla Motors (TSLA) Tom Aspray – ViperReport.com Tesla Motors (TSLA) reports earnings on Thursday, January 26th. From CNN Business 24 analysts have it rated as buy, 5 think it will outperform, 12 have it rated as a hold with 1 outperform and 3 have it rated as a sell. The rating review from Benzinga was similar, 12 rate it as a buy, 2 as overweight, 4 as a hold and one rates it as a sell. Their highest price target is at $360.00, the lowest is at $130 with $199.41 as a consensus target. TSLA is down 63% in the past 52 weeks. The weekly chart shows the break below long-term support, line a, in October 2022 (point 1). TSLA reached its weekly starc-band in December with a low of $101.81. It is now trying to rebound to the monthly pivot at $143.45 with the declining 20 week EMA at $181.92. The relative performance (RS) violated its support, line b, confirming the price action, and has since made a series of lower lows. It shows no signs of a bottom as it is well below its declining WMA. The OBV dropped below support, line c, ahead of prices. The current downtrend, line d, goes back to October 2021 as the OBV has stayed below its WMA for the majority of the time. With last week’s action, the OBV did close above its WMA which is encouraging. I will be watching it in the weeks ahead. The daily analysis on both MSFT and TSLA is positive after last week so they can certainly rally further before and after earnings. The weekly analysis for MSFT shows no signs of an intermediate-term bottom so the resistance at $262.50 may be a tough barrier. The OBV action in TSLA is more encouraging and it has been much weaker than MSFT over the last year. Therefore in my view, it has a better chance of bottoming in the first half of 2023. It would appear that a majority of the analysts have stayed positive on both stocks through their year-long declines. Therefore I would recommend that both investors and traders confirm all analysts’ buy or sell opinions using technical analysis.

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