US stocks look to recover ahead of potentially key session

Summary:

• US indices looking to recoup recent losses on trade concerns
• US30 closed below 200 day SMA for first time since June 2016
• Harley-Davidson falls lower on Trump tweet; Netflix called to open higher

The forthcoming US session could be a key one for stock indices with recent declines seeing several markets approach what could prove to be pivotal levels. Monday’s session saw pretty severe declines for all three large cap US benchmarks with the US30 ending the day below its 200 day SMA. The run of almost 2 years in closing above the 200 day SMA was the 7th longest in history, but now price has ended the day below there, there is some suggestion that the uptrend could be over. 

 The US30.cash ended yesterday below the 200 day SMA for the first time in almost 2 years. Source: xStation

The chief culprit for the recent weakness in stocks seems to be the ongoing global trade tensions with Harley Davidson announcing yesterday that they would move some of there production out of the US to circumvent the tariffs catching Trump’s ire. The US president took to Twitter to strike out at the plans, threatening to tax the firm "like never before." 

 Trump responded angrily to Harley-Davidson’s plans to move some production out of the US in an attempt to circumvent tariffs. Source: Twitter

Shares in the motorcycle manufacture dropped 6% on Monday and they are called to open lower once more today. Looking at the charts, the share price has failed to enjoy a similar rally to many US stocks in the past couple of years and the market is back in the low 40s and not far from its lowest level in recent years. 

 Harley-Davidson shares have fallen close to multi-year lows in recent trade, not helped by Trump’s threats. Source: xStation

Another stock which experienced a large decline on Monday was Netflix. Unlike Harley-Davidson, Netflix has been one of the stars of the US markets in recent years, hitting an all-time high at  just last week. The RSI for this market had gone extremely overbought, hitting the high 80s in recent trade and therefore some sort of pullback shouldn’t come as too much of a surprise. A favourable broker upgrade for Netflix, with a price target of $503 has seen the stock called to open higher once more today.  

 Netflix shares dropped sharply yesterday with the RSI moving back out of overbought territory. Source: xStation

 Analyst David Miller from Imperial Capital offered the following comments alongside the price target of $503 - representing a 31% gain on the current level. "In our view, the greatest competitive advantage Netflix has as it seeks to grow subscribers from current levels in its pricing structure, and the value the consumer receives for that structure," Miller wrote in a note. He noted that for just $7.99 a month, consumers can access content across film and TV dating back to the 1960s. The lack of a la carte pricing contrasts with video-on-demand services, which are priced at $3.99 to $5.99 a film. "In reality, there’s not much competition," wrote Miller. "As such, we continue to scratch our heads as to why the detractors on this name keep citing "competition" as a reason either to short the stock or sell it prematurely."