Charles Schwab (SCHW) is one of the largest brokerage firms in the US.  Unfortunately, it has been trading in step with the regional banks, and that has been a huge problem for the stock.

SCHW was trading close to 87 in January. Then Silicon Valley Bank went under in March and regional banks plunged, taking  SCHW along for the ride. Within a couple of days the stock hit a low of 45, a large volume of buying came in and pushed it back up to around 52.

It’s not a Regional bank

It’s still unclear to me with SCHW is trading along with the regional banks, since it doesn’t have the same risks as banks. While it does pay interest on cash that its brokerage customers have sitting in their accounts, it also earns interest from client margin accounts. The interest revenue far exceeds the interest expense, and as rates rise, that revenue continues to rise at a greater clip than the expense. SCHW also earns revenue from its proprietary mutual funds and ETFs as well as from trading commissions. Also, institutions on almost 89% of the stock, which should moderate trading volatility.

SCHW recently came out with positive earnings and guidance. They have plenty of liquidity to cover even the worst case scenarios and their customer base is not leaving them in any material way. Most clients who’ve used a broker platform for a while tend to stick with it. And customers primarily have their money invested in financial instruments as opposed to sitting in a bank account. So the perceived risk for a brokerage customer is much less than a regional bank customer.

But it trades with the Regional Banks

Just because the SCHW fundamentals are very different from a regional bank, it still is considered to be part of the regional bank sector. That means that as the sector gets hit, SCHW will most likely trade down along with it. Something like, “throwing the baby out with the bathwater.” Therefore, any decision you make about trading this stock has to recognize that as much as you think SCHW is different than the regional banks because it is a brokerage, it will most likely move with the regional bank sector, for the most part. There will come a point, I believe, at which investors will recognize the difference and buy SCHW. I wish I knew exactly where that point will be, but the best we can do is look at the chart and try to find a potential support level.

The SCHW Daily Chart

The main thing I want to focus on in this daily chart is volume. When SCHW hit a low of 45, a strong wave of buying volume came in and pushed the stock all the way up to where it closed at around 52. The stock then came back down on lighter volume but again the buyers came in to support the stock at around 47-48.

If you take a close look at the volume you’ll notice that the buying at support was relatively much stronger than the selling volume around it. The selling volume on this most recent move lower has been much lighter.

If we compare the recent selling volume on SCHW with the selling volume on a Truist bank (TFC), considered to be one of the stabler regional banks, you’ll notice that the TFC volume is much heavier. The other regional banks reflect the same heavy selling pressure whereas the SCHW selling volume seems much more muted.  This could be a signal that the selling in SCHW is a weak move and could reverse.

This move lower in SCHW looks like it’s a sympathy move with the rest of the regional banking sector as opposed to a move to specifically target SCHW. The lack of volume indicates a lack of conviction.

The 45 level was where the buyers came in with conviction back in March. It could act as support again.

Bottom Line

If you don’t already own SCHW, I definitely wouldn’t buy it before I see it hold 45 and strong buying volume coming in at that level. Even if it does hold support, it still will, most likely, be traded together with the other regional banks, which means that it probably won’t be going much higher in the short term. But if you want to try and trade it if it starts reversing at 45, you’ve got a well defined area to stop out at — if it breaks 45 and continues lower. Looking at the premarket action today (May 4, 2022), we’ll probably have our answer pretty soon. If you do decide to hold it for the longer term, the stock is paying around a 2% dividend.

Here’s a screencast of the SCHW trade setup:

Is now the time to buy Apple?

Let’s look at a weekly chart going back three years with a Fibonacci retracement study. You can see that the 50% retracement level is $118. Today, December 29th, the stock is trading at $126, so you’ve got 8 points down from here. Then you’ve got the 200 day moving average at around the same area or a bit lower — around $115. Below that you’ve got a large area of long-term support at 103 – 104.

So is now the time to buy Apple?

It was trading at $182 a year ago and the fundamentals of the company are strong. It’s got tens of billions in cash and it’s clearly not going out of business. So if you are a long term investor holding for many years, this might be a fine place to buy. But even if you are a long-term investor, you still want to pick a strategic point of entry into the stock. You wouldn’t want to be the guy buying at 180 a year ago, because now you would be almost 60 points down. And even if you are holding for the longer term, a 60 point drop is not going to make you feel too happy. It might even make you sell the stock, which I don’t think you should do at this point.

So even if you are a long-term investor you probably should wait until it hits the 118 to 115 level to start buying. If you want to be a bit safer, you’ll wait until it gets closer to 105.

Of course, there’s always the risk that AAPL might not go lower and you miss a massive rally. However, in this environment of rising rates and growing recession risk, I doubt that you’ll miss the boat if you don’t buy right away. And even if you miss the first 5 or 10 points, you’ll still have plenty of room to ride AAPL higher.

If you want to buy right now, then you can buy a portion of what you would normally buy. For example, if you want to buy 100 shares, buy 25 shares here and then buy more if the stock comes down, until you’ve bought your entire position.

Remember, there’s no law requiring an ordinary investor to be fully invested in the market. If you don’t like the current market environment and think that you will have a better opportunity to buy stocks at cheaper prices, then you can keep your cash in an interest bearing instrument and make a safe 4% or higher return. Considering that the S&P was down 19% in 2022, getting a safe return is not such a terrible idea.

Today I want to take a look at Netflix. We all love Netflix, at least watching it. But if you bought it at 700, which was the its all time high, then you’re not too happy right now. The stock hit as low as 162 and seems to have bottomed there. It’s practically doubled since the bottom, closing at around 320 on Friday 12-2.

You’ve got some resistance in the 320 to 322 level. If you can get through 322 with volume then it’s got at least until the 340 area, probably between 340 and 350, which is another 20 to 30 points. Of course a lot will depend on what the overall market is going to do. If the entire market moves higher, Netflix could break through this resistance. If the entire markets gonna move lower, NFLX can head back down to the 300 level. You’ve got 28 points up and 20 points down, so you wanna wait and see what you know how Netflix is going to react to this 322 resistance level.

Now if you wanted to try and anticipate the move and go long here, you’d want to put a stop below the 34ema, which is around 310-311, so you’ll be taking on a nice amount of risk. You could also put a tighter stop at around 315 and see what happens.

I would just rather wait and see how NFLX reacts to the resistance level. If it breaks through then go long and if it fails then think about going short.

 

Crude oil prices have been falling since reaching close to 124 in early June ’22. On September 23 WTC crude hit $76 and then bounced to $94 before pulling back to $81. The $94 level then served as resistance again on Nov. 11. From there WTC went lower and found support at the $80 level until yesterday (11/22), when it blew through $80 and through $76.

The break below $80 and continued quick move down was seemingly connected to a report that OPEC was considering increasing crude supplies. When that report proved to be inaccurate, WTC bounced off of the $75 level and moved back above $80. The question now is whether WTC will head back down and break through $75 support and head to the 60s or continue to move higher towards $94 resistance.

Here’s the daily chart which clearly shows the support and resistance lines:

Oil equity names have been moving lower along with crude prices. Chevron (CVX) topped out at around $190 on Nov. 11 and then headed lower. If y0u look at the daily (below) you’ll see that CVX bounced off the 34 ema (blue line) at around 175.50 on 11/22 and then reversed, along with crude, to end the day just over 181. It will probably continue to follow WTC, either up or down.

There’s no way to know which way it will go.

The macro picture still looks strong for crude, since supply is stay way short of meeting increased demand. The onset of winter and continuation of the Russia-Ukraine conflict are strong tailwinds for crude, and CVX, to maintain support or move higher. On the other hand, the China lockdowns continue to weigh on oil demand. But China can’t stay locked down forever, and when they do finally reopen, demand will get even greater. OPEC has made it clear that they are not going to increase supplies in the near future. So supply seems challenged for the foreseeable future.

Of course, if the US (and worldwide) recession deepens and the overall stock markets heads lower, the oil equities will likely be brought down with the rest of the market, although possibly not to the same extent. If inflation goes higher or stays at this level, oil prices will likely remain stable or rise as well.

Therefore, a case can be made for both the bulls and bears when it comes to crude and the oil stocks. But it seems as though the smart money continues to stick with and remain overweight oil, and the macro situation looks positive.