Market sentiment is not favorable for stocks
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Forty Days of Madness on the South Korean Stock Market
The South Korean stock market posted an astonishing rise in the first half of the year, driven largely by the artificial intelligence-related semiconductor boom that benefited both Samsung and SK Hynix. As foreign investors became net sellers, the role of local retail investors has become increasingly prominent in recent times. However, the introduction of leveraged ETFs tracking a single stock further exacerbated the already mounting volatility in South Korea’s stock market. Following a sharp rally, a reversal occurred in mid-June, followed by a significant correction in July. In light of these developments, we examined what might happen next on the South Korean stock market.
The European defense industry could perform well
The European defense sector has come to the forefront in our momentum-based screening list. European companies that stand to benefit from rising defense spending remain the focus of investor attention. Based on our screening, two French companies—Dassault Aviation and Thales—have come into focus. As a manufacturer of Rafale fighter jets and Falcon business jets, Dassault Aviation is a key player in the global aviation industry, while Thales is one of the leading suppliers of defense electronics, radar, communications, and cybersecurity systems. The technical outlook for both stocks has been favorable recently, and significant opportunities may arise based on the technical patterns that have formed. As a result, it may be worth keeping an eye out for long entry opportunities in these stocks in the near future.
There is still no significant change on the U.S. stock markets: indices are trending downward, and the declines are becoming increasingly steep. Momentum continues to point downward, so there is currently no justification for seeking long positions. Only the energy sector has proven resilient, managing to rise thanks to soaring raw materials prices. Outside the energy sector, however, there are no suitable targets that appear poised to turn around and offer significant upside potential. Although the model identifies several potential targets, after a 20–40% rally, there are no longer any entry points with a favorable risk-reward ratio. For this reason, while we are publishing the three stocks on the list, we still cannot issue a buy recommendation on a purely technical basis.
Best rated US stocks based on momentum ranking
List of stocks with a chance of a turnaround in the coming weeks
Most popular US stocks
The momentum model supports the creation of a technical based stock list that helps to find shorter-term trading opportunities. The model can be used to identify stocks that show reversal signals following more sustained falls/underperformance. We examine one-year, six-month, three-month, one-month and five-day momentum values, which are used to rank the stocks under consideration. The higher a stock is ranked in the order, the better it technically performs relative to the others. The change in the ranking over time is used to determine the life cycle of the stock.
- In the first table, we collect the stocks that show the most attractive picture compared to the others in a given week based on momentum factors, of which those are also presented in a separate chart where a favourable situation can be identified based on additional technical analysis tools.
- In the second table, we list the stocks that are already worthy of being placed in watchlist status. They are not among the best performers, but they have the potential to improve and signal a turnaround in a few days or weeks.
- In the third table, we have also collected the more popular stocks to help identify their position in the momentum order.
The report shows the results of a technical - quantitative based stock screening, which does not examine the fundamental background/value of the companies. For this reason, risk management/position sizing rules should be designed accordingly.
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