Part 2


Charles Schwab Corporation (SCHW)

Our next stock-pick from the XLF for May is Charles Schwab Corporation. (SCHW).

Company background and financial performance

Headquartered in San Francisco, California, Charles Schwab Corporation is a multinational company and a leader in the financial sector. It offers savings and loan services, as well as wealth management, banking, securities brokerage, custody and financial advisory services. In fact, Charles Schwab is the 13th largest financial institution in the United States with over $3.5 trillion in client assets. Moreover, the company is the third largest asset manager in the world behind BlackRock and Vanguard.

By looking at the financial performance of the company, we shall say Charles Schwab beat earnings expectations in the past 3 quarters since Q3 2020. The company’s most recent Q1 2021 results came out better than expected again, reporting earnings of $0.84 per share, while the expectations were for $0.82 per share. That has given a quick boost to the share price, which has already gone up almost 10% after the report.

The company’s market positioning remains strong and based on its solid financial performance, we are expecting to see its share price rise further in the near future.
Before we do that, let’s have a look at the technical side of things and decide whether it would be a good idea to add the stock to our portfolio.



Technical analysis

By looking at the chart, we could see the massive uptrend that has been taking place on SCHW stock since March last year. In fact, the stock started rising from the $27 lows back then to reach the current highs at $71, meaning the stock has tripled in value since then, boosted by the company’s strong financial performance and market positioning.

The daily chart clearly shows the key support (broken resistance) at $67-$68, which clearly matches with the middle Bollinger band at that point as well as the 50 day moving average indicator which is standing at $66, giving further bullish indications at that point. Should the price drop below that support mark, it would be testing the next key support at $64 that matches with the 38.20% Fibonacci retracement level that is giving a further buying indication and a signal that the price could easily start bouncing from one of those key support levels. With the RSI and Stochastics being quite overbought at the moment and by taking into account the major support levels at $66 and the $64 marks, we would prefer to wait for a short-term correction and start buying at around those levels in order to add SCHW stock to our portfolio and make high profits to the upside.


Chart: SCHW

We would wait for a short-term correction on the stock and start buying at around the $67 support. Should the price drop further in the short-term, we would be buying even more aggressively at the next strong support at $64 where more buying pressure is expected and it would give us a chance to get a better average price on our long positions. Our initial profit-taking target is set at $71-$72, followed by the next target at $82-$85 where we would be fully cashing in our profits.




Gilead Sciences (GILD)

Our next stock pick from the XLV for May is Gilead Sciences (GILD).

Company background and financial performance


Founded in 1987 in California, Gilead Sciences Inc. is an American biopharmaceutical corporation, focused on researching and developing antiviral drugs that are being used for treating HIV, hepatitis B and C, liver diseases, hematology and oncology diseases, as well as respiratory diseases. Gilead is among the leading biopharmaceutical companies out there and thanks to its strong financial performance and market positioning, the company has become an important member of the NASDAQ Biotechnology Index, as well as the S&P 500.

The company has got a wide range of products in its portfolio, some of which game changing products, allowing it to gain a decent market share and therefore be able to boost its financial performance. Gilead’s HIV franchise has remained strong thanks to its Biktarvy sales. Moreover, the company has been developing its oncology franchise through acquisitions and collaborations, which has also been positive for its overall financial performance. The company’s acquisition of Immunomedics was another smart decision by the management, which added an approved drug to the portfolio.
In fact, the company’s Veklury product that has been used for treating COVID-19 has also boosted the top line and the trend is expected to continue as the pandemic is still out there and expected to stay at least for the foreseeable future.

Gilead reported strong financial results in the Q3 and Q4 of 2020, beating analysts’ expectations and proving its solid financial performance and market positioning even during the COVID-19 pandemic. The company delivered its Q1 2021 financial results and reported earnings of $2.08 per share, while analysts had expected $2.06. In other words, GILD reported another strong quarter, further confirming its strong presence in the market it operates.


Technical analysis

By looking at the daily chart, one could see the strong uptrend that has been taking place on the chart since the beginning of this year. In fact, the share price bounced from the $56 lows back then to reach the $68 highs in February, followed by a correction towards the key support at $60 and another strong bullish movement towards the $67 mark. The price bounced right after the earnings beat in the end of April, going up from the $62 support to reach the current levels at $65-$66. The daily chart clearly shows the strong support at $63, followed by the next key support level at $62, where lots of buying pressure is expected.
Moreover, the technical indicators, such as Stochastics and RSI have already gone into the oversold territory and crossing up, giving further bullish indications.
Based on the strong financial performance of the company, we have decided to add the stock to our portfolio at those support levels in order to benefit from the very likely bullish movement expected from those levels.


Chart: GILD

We will wait for a little pullback on the price and start buying GILD at around $63.50, just above the support at $63. In case the price drops further in the short-term, we would be interested in buying even more aggressively at the next major support at $62, which would give us a better average price for our buy positions. Our initial profit-taking target would be set at $67-$70, followed by the next target at $75-$80, where we would be fully cashing in our profits.


Sincerely,

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