Technical analysis

Two stocks to watch: Week 8, 2024

By Antreas Themistokleous

21 February 2024

3212 two stocks

Week eight is underway. Here are two stocks to monitor just days before their earnings. Putting the spotlight on Li Auto and Baidu.

Li Auto Inc.

Li Auto Inc. (LI) saw its share price undergo significant volatility last quarter, with frequent gaps appearing on its chart. However, it managed to close the year with a positive gain of 3% for Q4. The company's earnings report for the fiscal quarter ending December 2023 is expected to be released on Monday, 26 February, before the market opens. The consensus EPS forecast is $0.29 (USD), compared to $0.04 in the same quarter of the previous year.

Li Auto has demonstrated considerable growth in deliveries, improved profitability, and efficiency. However, macroeconomic uncertainties in China and competitive pricing battles continue to present challenges. Despite the company's reasonable valuation relative to direct competitors, the macroeconomic environment in China, characterized by deflationary pressures and an oversupply of EV makers, creates uncertainty. As a result, the company currently struggles to attract significant investor interest.

Technical analysis indicates that the share price is trading at a pivotal point on the chart, where 50% of the daily Fibonacci retracement level, the 50-day moving average, and the upper band of the Bollinger Bands converge. Additionally, the Stochastic oscillator is at extreme overbought levels, suggesting that a downward correction may be the more likely scenario. If the current level of $32 holds and the price corrects downward, the first potential support area could be around the $30 price point. This level represents psychological support from the round number and was the last area of price consolidation in mid-February.

Conversely, if the bullish momentum outweighs bearish pressure and the price continues its recent upward trend, the area between $33.50 and $34 could serve as the next resistance level. This is due to it encompassing 61.8% of the daily Fibonacci retracement level and the 100-day moving average.

Baidu, Inc.

Shares of Baidu, Inc. (BIDU) experienced a decline of approximately 12% in the last quarter of the year. The company's earnings report for the fiscal quarter ending December 2023 is anticipated to be released on Wednesday, 28 February, before the market opens. The consensus EPS is $1.95, up from $1.49 in the same quarter of the previous year.

Despite the share price setback in the last quarter, Baidu's financials tell a different story. As of 30 September, 2023, the company's total assets significantly exceeded its total liabilities at a ratio of approximately 2.5:1. Additionally, its long-term debt has decreased by more than 7%. Furthermore, the company's net profit has increased for six consecutive quarters, and the current ratio stands at an impressive 282%, indicating that Baidu is well-equipped to handle financial challenges.

From a technical analysis perspective, the share price has encountered resistance at the 50% Fibonacci retracement level and is currently correcting downward. The Stochastic oscillator is at neutral levels, indicating no overbought or oversold conditions, while the 50-day moving average trades below the 100-day moving average, suggesting that the bearish momentum persists. If the current correction continues in the near term, the first potential support area could be around the $103 price level. This level is just below the 23.6% Fibonacci retracement and has been a reaction point several times in the past month.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Antreas Themistokleous
Antreas Themistokleous

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.