Welcome to the fifth episode of our EquiTalks program. Today is March 12, 2019, Tuesday, and I am going to talk about NOW Corporation.
For those who are new to this EquiTalks program, here’s a brief background.
Every single day, I pick one stock, and then I give you my technical analysis and share with you my overall sentiment. Finally, I share with you my trade setups regardless if you already have a position or you’re still thinking on whether or not you will trade the name.
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Apparently, NOW has zero dividend announcements.
NOW Corporation Chart
NOW Corporation is currently being traded at 2.85. Intraday high is 2.90, and intraday low is 2.82.
I’ve already pre-plotted this downtrend channel, which is rooted from February 15. The downtrend channel started on February 20. Maybe sometime in the third week of February 2018.
As we can see now, the downtrend is still traversing the channel. There is a relatively low volume that’s why the price of NOW Corporation has just been moving sideways since November last year. It started to trade the range between 1.98 to somewhere near 4.30.
Traders think that there’s no positive catalyst yet on NOW for them to be interested in buying the stock at a higher price. That’s why the behavior of the price is still in a sideways movement.
But if we’re going to take a look at the chart on a long-term scale, it’s evident that it’s still traversing the downtrend channel.
As far as the alignment of the moving averages is concerned (10,50,200 days SMAs), we can see that the longer-term SMAs are the ones above the shorter-term ones. That’s a confirmation that this stock is still bearishly moving inside the short-term and long-term period.
Main support is at 1.98 while main resistance is near 5.94.
Net Foreign Sellers
Let me make some comments about its net foreign trade. I’m sure you’d like to know if foreign investors are net buyers or net sellers for NOW Corporation year to date.
They are net foreign sellers. If we are going to include the tall net foreign buying amount on January 14. How much was that? It’s about PHP 17 million worth of net foreign buying.
Now, let’s take a look at the net foreign selling last January 31. It’s only about PHP 7 million so I think it’s more or less in a net foreign buying state, but it is not that significant. That’s why I am not going to factor in the participation of the foreign investors when I come up with an overall sentiment for NOW Corporation.
MACD Way Below Zero
Although it is above the signal line, MACD is still way below the zero line. For me, we still have to wait for it to register a price higher than its 10 SMA, preferably with a positive volume above its 10-day volume average.
We have seen nothing but flimsy volumes for the past few weeks. So, it is not enough to say that NOW Corporation is on its way to a reverse direction once it closes a price above the 10 SMA but with volume that’s just barely above its 10-day volume average.
If possible, I would prefer to see 200% of its 10-day volume average to be coupled with a green candlestick. When that combination happens, and the price soars above the 10-day simple moving average, maybe we can consider that as a signal that the traders may have already seen some catalysts for them to buy the stock at a higher price.
But for now, it is evident that almost everyone is still in an eavesdropping mode. Nobody wants to buy at a higher price. Again, the price was moving in a sideways direction since November last year.
Overall, when we zoom it out, we still see that it is still in a downtrend channel since February of 2018.
When it comes to the risk level of NOW Corporation, it’s still a low-risk stock because of its historical volatility score of 36%.
This is a perfect example of “not because it has a low-risk level; it does not mean it’s an automatic buy.” You don’t blindly buy any stock just because it has a low-risk level based on its volatility score.
You would have to check on another parameter such as volume. As always, volume is king when it comes to short-term trading.
Price Range to Watch Out For
As of recess, NOW Corporation closed at 2.85, currently down by 1.38%. The net foreign trade is a negligible net foreign buying worth PHP 2,860.00.
The range that got the biggest volume and the highest number of trades is between 2.83 to 2.89. But if I were to pick specific price points instead of a range, then I would give you 2.83, 2.84, and 2.85.
I think this is the best range that we need to watch out for if you have a position on NOW Corporation and you decide to trade the name.
There’s a chance for this stock to hit below 2.80 level because the price points that got the biggest volume and the highest number of trades are super close to its intraday low of 2.82. When the force of the bears increases this afternoon, then they might pull down the price even lower than 2.80. You need to be on top of your trailing stop loss so that you don’t incur some losses beyond your tolerable risk.
NOW Corporation Overall Sentiment
My overall sentiment is bearish. It is not neutral to bearish but completely bearish because of the absence of significant daily volumes.
I can’t rely on the participation of foreign investors because they are not actively trading NOW Corporation as well. It’s just a game of volume now.
As far as technical analysis is concerned, I’m particularly interested to see a spike in the volume of NOW Corporation and if possible, it’s in favor of the bulls.
If you don’t have a position on NOW Corporation yet, that’s a good decision. I would recommend that you watch it below 2.80. Once it breaks down below 2.80, you start monitoring near 2.0. 2.80 already acts as mid-term support.
What if you already have a position? Let’s say your average price is higher than 2.85, what’s my recommendation? You need to be on top of your trailing stop loss.
What Is a Trailing Stop Loss?
If your average price is higher than the current price, I would suggest you calculate your trailing stop loss from your average price.
How is that? Let’s say you would like to risk up to 10% of your trading capital on NOW Corporation and your average price is at 2.90. Since your percentage of risk tolerance is 10%, all you have to do is to get 90% of your average price.
The answer to that is the position of your trailing stop loss. Once that price is hit, then you have to sell. If you calculated your trailing stop loss and it gets hit, and you don’t respect it, it does not make sense to have risk management.
The reason you have to respect your risk management system is so that you can protect your capital, you can preserve your gains if any, and you can prevent unbearable losses.
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Have a great day!