Two stocks to watch this week: Li Auto and UPS
By Antreas Themistokleous
03 August 2023
Li Auto Inc
Shares in Li Auto (LI) had a profitable second quarter with gains of more than 20%. The company is currently at a staggering +83% compared to 1 March. The company’s earnings report for the fiscal quarter, ending June 2023, is set to be released on Tuesday, 8 August, before the market opens. The consensus EPS is $0.19 (USD) compared to the same quarter of last year at -$0.01.
Li Auto is doing exceptionally well and has outperformed its rivals Xpeng and Nio in car deliveries for July showing an increase of 227.5% year-on-year. The company may not be the ideal candidate in terms of dividend payouts but its balance sheet as of 31 December 2022 shows a ratio of assets to liabilities of 2:1. Also the current ratio of 245% further supports the narrative of a financially healthy company.
On the technical side, the price has been trading in an upward movement since mid May and continues until the time of writing. The price is trading above the upper Bollinger band, indicating that market volatility is fueled up. The Stochastic oscillator has been in the extreme overbought levels for almost one month straight. This could mean we might see a correction in the market before resuming the overall bullish trend.
The 50-day moving average is trading well above the 100-day moving average, further confirming the validity of the bullish momentum.
All in all the company seems to be at its best, but even though “the trend is your friend” it is not very wise to jump on a trade when the share is near its all-time high.
United Parcel Service Inc
United Parcel Service (UPS) share price has lost almost 10% of its valuation in the second quarter of 2023. The company ’s earnings report for the fiscal quarter, ending June 2023, is set to be released on Tuesday, 8 August, before the market opens. The consensus EPS is $2.51 compared to the same quarter of last year at $3.29.
The company has a relatively consistent dividend yield of more than 3% in combination with a payout ratio of around 50%, which makes it an attractive addition to investors' portfolios.
From a technical analysis perspective, the price is trading in an ascending channel for the last month, while it is currently testing the technical resistance area of the gap formed in late April. If the price manages to break below the 61.8% of the Fibonacci retracement level then the next level of support could possibly be found around the $182 price area, which consists of the 50% of the Fibonacci as well as the 100-day moving average.
The RSI indicator retraced from its extreme upper limit of 70, but it's still above the 50 line so we cannot confidently gauge the short-term direction. One factor affecting the directional movement of the price will most certainly be the earnings report on 8 August.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.
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