Part 3


Amazon Inc. (AMZN)


Company background and financial performance

Our first stock from the SPY for June is Amazon Inc. (AMZN). The stock represents 4% of SPY’s portfolio and is the fund’s 3rd largest holding after Apple (5.6%) and Microsoft (5.4%).

Amazon.com is among the largest e-commerce providers, with operations mainly in North America but currently spreading across the world. Furthermore, by acquiring the Whole Foods Market, Amazon managed to establish its footprint in the physical grocery supermarket space.

The company’s online retail business is concentrated on its Prime program, which is well-supported by its massive distribution network. Amazon is also enjoying its dominant position in the cloud-computing market, especially in the Infrastructure as a Service (IaaS) space, thanks to the Amazon Web Services (AWS), which is among the company’s high margin generating businesses. The company is quite active in the Artificial Intelligence (AI) space, backed by its Alexa, which is helping the company sell its products and services.

Amazon beat analysts’ expectations by far in all the past 4 quarters, which has helped drive its share price higher afterwards. The company’s financial performance and market positioning are extremely strong and we are expecting to see more bullish rallies on its stock in the future. Amazon reported $15.79 per share versus the $9.75 per share expected by analysts for the Q1 of 2021. All the past 4 quarter reports came out much better than analysts had anticipated and that further proved the company’s strong financial performance and market positioning during the pandemic times we are living in.


Technical analysis

Amazon was one of the best performing stocks in 2020, bouncing from the $1812 lows in the end of March to reach the $3552 highs in September (96%), meaning the stock had almost doubled in value in only 6 months. Since then, we have seen it trade in a channel between that resistance at $3552 and the major support at $2925. The price is currently trading at just above $3200. Yet, the daily chart clearly shows the first major support line at $3100-$3125 where lots of buying pressure has been taking place in the past 7-8 months. Even if the price breaks that strong support to the downside, it would be testing the next key support at $2925 where lots of buying pressure is expected to take place again and the price is likely to bounce from one of those key support marks. Furthermore, the 38.20% Fibonacci retracement matches with the support at $2925, giving further bullish indications, while the RSI is at 45 and could soon be giving further bullish signals as well. Overall, we believe Amazon has got a great market positioning and financial performance and the recent correction is giving us an amazing opportunity to buy low and make high profits to the upside. So, we have decided to add it to our portfolio.


Chart: AMZN

We would start buying AMZN stock at around the first strong support at $3100-$3125. In case the price makes a further correction, we would be interested in adding more to our long positions right above the next major support at $2925 where more buying pressure is expected. Our initial profit taking target is set at $3375-$3390, followed by the next target at $3590-$3630 where we would be fully cashing in our profits.




 
Linde plc. (LIN)


Company background and financial performance

Our first stock pick from the XLB for June is Linde plc. (LIN). Linde is the XLB’s largest holding with its 16% weight within the fund.

Linde plc is a leading multinational chemical corporation with German-American roots. It is actually the largest industrial gas company by revenue and market share. The company serves clients in different sectors, such as petroleum-refining, healthcare, manufacturing, food & beverage, fiber-optics, steel making, aerospace, chemicals and others.

The company’s revenue has almost tripled in the past 4 years and the net profit has doubled during that period of time. It has been beating analysts’ earnings expectations for 4 quarters in a row now and the company’s strong balance sheet and market positioning is expected to make high profits for shareholders in the future. With the economy starting to go back to normal soon, we are expecting to see Linde’s revenues and profits to further grow in the next few quarters and we believe this is a must-own stock in our portfolio.

Technical analysis

By looking at the chart, we could see the massive uptrend that has taken place on LIN stock since March last year. The price bottomed out from the lows at $143 to reach the $304 highs in June this year (113%). In other words, Linde has been among the best performing stocks in the sector since then. In fact, the massive uptrend is expected to continue at least in the short to middle term due to the economy going back to normal levels, countries opening their borders and enhancing economic growth, which would drive the company’s revenues and profits.

The daily chart shows the strong support at $291 that used to be a strong resistance, which was broken in the first week of May. Now, lots of buying pressure is expected to take place once the price tests that level to the downside.

Moreover, the 50-day moving average and the lower Bollinger band are standing right at that key support mark as well, giving further bullish indications.

Thus, we would prefer to wait for a short-term profit-taking correction on the price that could send LIN stock to that major support line and start buying around that level in order to boost our profitability to the upside.


Chart: LIN

We would start buying LIN stock aggressively at around $293-$294, just above the major support at $291. Should the price drop further in the short-term we would be looking to add more to our long positions at the next support at $280 where more buying pressure is expected. Our initial profit-taking target is set at $303-$308, followed by the longer-term target at $329-$335 where we would be fully cashing in our profits.





Sincerely,

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