Cowen and Company handed out a bull note to Draftkings Inc (NASDAQ:DKNG) this morning, lifting its rating on the sports betting concern to "outperform" from "market perform." The analyst cited the growing number of states legalizing sports betting and predicted a "robust" path for DKNG in H2 all the way through 2022. Cowen and Company also added that DKNG's recent pullback from its all-time highs near the $74 level -- notched late in the first quarter of 2021 -- presents a good risk/reward opportunity. The analyst maintained its $70 price target. 

The equity is up 1% at $57.21 this morning in response, taking another stab at overtaking the 100-day moving average, which has kept a lid on the shares during the past several sessions. Higher up, DKNG will have to contend with its 50-day moving average, a formerly supportive trendline that snuffed out its late-April rally. The $56 level looks to have emerged as support on the charts, though, and year-over-year DKNG still boasts a 186.9% lead. 

Cowen and Company is joining a mostly bullish brokerage bunch. Coming into today, 18 analysts called DKNG a "buy" or better, compared to eight "hold" or worse ratings. Plus, the 12-month consensus price target of $73.50 is a 28% premium to current levels. 

Short interest is still on the rise, with volume sitting at just shy of record levels. An unwinding of some of these bearish bets could put more wind at DKNG's back, especially considering the 24.78 million shares sold short make up a solid 7.3% of the stock's available float. 

$SPX daily candles the past 3 days look like patterns in January and February that preceded short-term pullbacks... doji-like candles (open and close around same level) - a "tri-star" in candlestick terminology with three in a row pic.twitter.com/CPiV8W4l2x

— Todd Salamone (@toddsalamone) April 28, 2021

Last Wednesday, all eyes were on the Federal Reserve and Chairman Jerome Powell, as the Federal Open Market Committee (FOMC) met. For those that think the Fed has had a heavy hand in supporting the economy and the stock market, these once-every-six-weeks events are important, as any surprise change in policy could have a major impact on the equity market.

On Wednesday, there were not any surprises on the monetary front and that was evident in the behavior of the S&P 500 Index (SPX -- 4,181.17), which closed within three points of its previous day’s close and less than two points away from its morning open.

From a technical perspective, the SPX’s price action on FOMC day and the previous two days caught my eye, which I posted about on Twitter per above. Specifically, after the Fed meeting, the SPX completed a third successive day in which the open and close were roughly the same. I referred to them as “doji-like,” as the open and closes were not exactly the same, but close enough that it was easily observed.

My immediate reaction was to see if three consecutive doji candles as described occurred recently. Sure enough, I spotted similar patterns in late-January and mid-February, both of which preceded short-term pullbacks within a couple of trading days.

A visual of the three-day pattern -- known as a “Tri-Star” -- is depicted in the daily SPX chart below. The circled areas are the tri star candlestick patterns.  Investopedia does a nice job of describing and interpreting the pattern here.

Within this link, you will find these words:

“A single doji candlestick is an infrequent occurrence that is used by traders to suggest market indecision. Having a series of three consecutive doji candles is extremely rare, but when discovered, the severe market indecision usually leads to a sharp reversal of the given trend”

The above description and implications are exactly what occurred in January and February. It remains to be seen if last week’s reversal pattern precedes an immediate decline like we witnessed in January and February. 

Friday’s action could be the start of something bigger, but bears beware that Friday’s low occurred just above the top trendline of a channel in place since mid-November, when positive headlines on a Covid-19 vaccine emerged. The top of this channel line is the first level of short-term support, which is at 4,174 today and 4,194 at week’s end.

A move into the channel suggests loss of momentum since last month’s breakout and risk of a further pullback to a second line of defense at 4,131, which is exactly 10% above the 2020 close.  A third potential support level is 4,100, which is the level at which the breakout above the top of the channel occurred on April 9.

If Friday is indeed the beginning of a selloff, the most important area of support is between 4,020 and 4,060. The 4,020 level will be the approximate site of the rising 50-day moving average at week’s end.

As discussed last week, with retail traders playing a major part in the stock market’s advance, this popular moving average could be key in determining whether such investors continue to buy or run for the hills if they see a break below it.

The 4,060 level is key this week from two perspectives:

1. At week’s end, it becomes the site of the bottom of the channel in place since November, and:
2. It's in the vicinity of 4,057, which is six times the 2009 closing low that marked an end to a bear market. Two times, three times, four times, and five times this closing low have marked major peaks or long hesitation areas since that bear market bottom. But so far, six times this low has yet to pose a major problem for bulls. This does not mean that bulls are in the clear, as a move above five times the 2009 low early last year proved only temporary before the pandemic-driven selloff occurred.

“…during instances where you see sentiment-based risk heightened, consider hedging or ensure that you have a plan for taking such action when the charts suggest doing so. If the charts continue to look strong, as they do now, it is best to stay the bullish course, with a plan in place to hedge when technical-based risks increase due to higher levels of support breaking down.”

          -Monday Morning Outlook, April 26, 2021

Just as the candlestick pattern discussed above hints at a pullback, various sentiment indicators that we track are showing optimistic extremes that make the market vulnerable to selling. Plus, option activity on CBOE Market Volatility Index (VIX—18.51) futures continues to hint at a pullback.

For example, the 10-day, equity-only, buy (to open) put/call volume ratio is at 0.32. A reading of 0.31 preceded the pullback that began in mid-February. And according to the weekly National Association of Active Investment Managers (NAAIM) survey, the average portfolio exposure was 103.72, with 100.0 considered fully invested and 200.0 being leveraged long. The last time a reading came in above 100.0 was mid-February. The current reading implies that this group is not a huge potential source of buying power like they were coming into April, when the reading was 52.02, or only about half invested.

Additionally, market participants continue to buy VIX calls at a high pace relative to puts. As I mentioned a few weeks ago and as depicted in the graph below, such behavior in the past has preceded volatility pops as measured by the VIX. In fact, the 20-day VIX buy (to open) call/put volume ratio recently hit the highest level since the end of May 2020, which preceded a VIX pop two weeks later. These VIX pops are coincident with equity market declines as the demand for portfolio insurance increases when the market begins turning south.

Perhaps bulls can take some comfort that this ratio is not at 5.0, which preceded the huge pandemic-driven selloff in February 2020 that saw the VIX shoot up above an 80 reading.

Per my comments last week, this suggests having an action plan for hedging long positions if support levels begin to break down. As of Friday, this has not yet occurred.  But gaps below support are a risk as well, and with the bearish candlestick pattern that emerged last week, this may be the signal for some of you to implement a hedge or take some other action to guard against a selloff before it is too late.

Todd Salamone is Schaeffer's Senior V.P. of Research

Continue reading:

• The Week Ahead: First Week of May Kicks Off at Height of Earnings Season
• Indicator of the Week: Putting "Sell in May and Go Away" Under the Microscope

The first week of May will be a busy one for Wall Street. Among the multiple economic indicators that are on the schedule, traders will be paying special attention to trade deficit data, a fresh ADP employment report, the Markit manufacturing and services purchasing managers' indexes (PMI), jobless claims, and nonfarm payrolls. The earnings docket is packed, too, with reports from the likes of Chegg (CHGG), Etsy (ETSY), Cloudflare (NET), Fastly (FSLY), Lyft (LYFT) and Pfizer (PFE).

There will be no shortage of economic indicators today as investors look ahead to the final Markit manufacturing PMI, as well as the ISM manufacturing index. Plus, construction and and motor vehicles sales (SAAR) is set to come out.

The following companies are slated to release quarterly earnings reports today, May 3:

Looking ahead to tomorrow, Tuesday will be quieter, with only trade deficit data and factory orders on tap. All economic dates listed here are tentative and subject to change.

It’s been awhile since we reviewed market caps in this space, and by a while, we mean only a few weeks. It’s also been some time since we checked in on tech leader Microsoft (MSFT). Given some recent headlines and milestones, I wanted to dig deeper into the impact of MSFT being the second company to reach the $2 trillion market-cap level -- after Apple (AAPL), of course -- and weigh some of the implications of said news-driven reports possibly driving this recent surge.

First unpacking the $2 trillion market-cap milestone, Microsoft could be looking at this level as support in the coming weeks and months. Even further, MSFT hosts a price-to-revenue of 13, a lofty reading compared to AAPL’s 8. The chart below shows Microsoft’s long-term market-cap movement since 2011 -- the stock boasting an impressive growth pattern in stride with the equity’s shares. The two are continuing their run neck-and-neck, with the market cap growth seeing pullbacks on only the rarest of occasions.

Digging into some of the news that has been driving Microsoft into headlines over the past month is the company’s interest in buying online streaming platform Discord. Back in late March, Bloomberg reported that the tech behemoth was in talks to buy Discord for more than $10 billion. Discord reportedly reached out to multiple buyers, and VentureBeat said that the company is in final sales talks with at least one party. However, another person familiar with the matter said the company is more likely to go public. This buzz sent MSFT up near $240 for the first time since February, but simmered this past Tuesday, April 20, when Reuters and several other media outlets reported Discord had chosen to move forward independently in its company growth. This update did little to sway investors, however, as MSFT remained within a chip-shot of its April 19, then record high, $261.48.

Even more recent, Microsoft stock enjoyed a fresh bull note Thursday night from Wolfe Research. Analyst Alex Zukin initiated coverage with an "outperform" rating and $290 price target. An optimistic approach, considering Zukin’s price target boasts a 12.8% premium to the equity’s Thursday close. However, this is not to dismiss Microsoft’s impressive midday surge to a fresh record peak of $261.78 earlier in the day. Zukin cited that the company appeared fully valued "on the surface, " but one of the few names to continue its growth "in the black" in the coming months.

For the contrarian trader, however, there remains room for further upgrades on the equity, with four covering brokerage firms still sporting a tepid "hold" recommendation on Microsoft stock. Plus, now looks like the ideal time to bet on MSFT, as options are looking like an affordable purchase. This is per the stock’s Schaeffer's Volatility Index (SVI) of 26%, which stands in the 19th percentile of its annual range, suggesting that options players are pricing in lower-than-usual volatility expectations at the moment.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, April 25.

Anticipation over another big round of earnings reports gripped Wall Street this week, dictating much of the market's movement and keeping investors at the edge of their seats. Sentiment on Monday was mostly lackluster. The three major indexes clung close to breakeven for the majority of the day, though the Nasdaq and S&P 500 managed to pull record closes, bolstered by optimistic Covid-19 comments from Dr. Anthony Fauci. Fears over inflation kept the Dow in check, though, while the dire coronavirus situation in India also gripped headlines. Tuesday's trading was also somewhat subdued, though the day was jam-packed with record-setting economic data and investors looked toward a barrage of tech earnings set to report after the session's close. 

Tech reports and comments from Fed Chair Jerome Powell wound up shifting markets lower on Wednesday. The central bank's decision to keep interest rates near zero was overshadowed by Powell's assertions that economic recovery is still "uneven and far from complete." The Dow turned volatile on Thursday but eventually roared to a triple-digit pop, thanks to impressive quarterly reports from the likes of Apple (AAPL) and Facebook (FB). This surge proved short-lived, however, and today stocks are headed for more losses, both on the day and the week. 

Semiconductor Sector Charges the Earnings Confessional

It was a busy week in the proverbial earnings confession booth. One sector seeing plenty of air time was the semiconductor space, and a chip stock that came away with a favorable post-earnings reaction was Qalcomm (QCOM). The company's fiscal second-quarter earnings and revenue beat gave the equity a major boost, and attracted a few bull notes. Analysts were quick to chime in on an earnings beat from Advanced Micro Devices (AMD), too. The security raked in at least seven price-target hikes, though Summit Insights Group did wind up downgrading the stock to a "hold." Skyworks Solutions (SWKS) wasn't as lucky as its sector peers. The equity has taken quite the drubbing during today's trading, even with an earnings beat and several bull notes under its belt, likely due to a disappointing forecast. 

Big Tech and Earnings Season: the Good, the Bad, and the Ugly 

Tech stocks ruled the week this week, with Wall Street wading through major updates and earnings reports from social media bigwigs and e-commerce titans alike. Apple (AAPL), of course, was on the radar, attracting plenty of attention from option traders and analysts after its upbeat earnings report and positive buyback news drove the stock higher during yesterday's trading. Earlier in the week, however, the equity was flatlining as investors pored over the company's latest economic investment plans. 

Amazon (AMZN) also made a splash after its earnings report, though its quarterly beat wasn't enough to lift stock futures on Friday morning. Meanwhile, two social media giants, Facebook (FB) and Twitter (TWTR), announced their first-quarter results, eliciting very different reactions from traders. In fact, the former grabbed a fresh record high, following its announcement, while the latter gapped dramatically lower, deflated by concerns over slowing user growth. 

Earnings Season to Reach a Fever Pitch During First Week of May

The first week of May will drop investors right into the height of earnings season, with reports from the likes of Chegg (CHGG), Etsy (ETSY), Cloudflare (NET), Fastly (FSLY), Lyft (LYFT) and Pfizer (PFE) all on tap. Traders will also be paying special attention to trade deficit data, a fresh ADP employment report, the Markit manufacturing and services purchasing managers' indexes (PMI), jobless claims, and nonfarm payrolls.

In the meantime, traders can check out the latest Monday Morning Outlook, in which Schaeffer's Senior V.P. of Research Todd Salamone parses over some of the key storylines that moves markets in late April. Plus, Schaeffer's Senior Quantitative Analyst Rocky White looks put an old investor trope under a microscope to see if there's any truth in the catchphrase. 

Welcome back to our weekly series, Schaeffer's Cannabis Stock News Update, where we recap what happened in the world of marijuana stocks last week, and look ahead to how the cannabis industry will continue to develop in 2021.

Investor interest in the cannabis industry is growing at an explosive rate, and the leading players continue to break through legal barrier after legal barrier, especially in the United States. More than 40 U.S. states legalized recreational and/or medical marijuana by the end of 2020. Now, more and more companies are starting to see the opportunity in cannabis cultivation, marketing, distribution, and technology.

U.S. lawmakers introduced a bill on April 29 to study the impact of state-level legalization of cannabis, and named it the Marijuana Data Collection Act. The goal of this bill is to better understand the economic, public health, criminal justice, and workplace impact of medical and recreational cannabis.

Here is a quick roundup of major cannabis stock news this week:

Akerna Corp (NASDAQ:KERN), an enterprise software developer of the cannabis industry's first enterprise resource planning (ERP) software technology, reported that on April 20 a widely popular, yet unofficial "holiday" celebrating cannabis consumption was the highest sales day for retail cannabis ever recorded, with approximately $111 million in medical and adult-use sales. The 5-day period surrounding the holiday grossed over $373 million. 

Aphria Inc (NASDAQ:APHA), a leading global cannabis-lifestyle consumer packaged goods company, announced on April 29 that it has entered the concentrates category under the Good Supply brand, with the introduction of hash, wax, and kief.

cbdMD Inc (NYSE:YCBD), a leading, highly trusted cannabidiol brand, announced on April 29 that it hired Dr. Sibyl Swift as its new vice president for scientific and regulatory affairs.

FSD Pharma Inc (NASDAQ:HUGE) reported a group of concerned shareholders mailed an information circular and gold proxy to HUGE shareholders for its upcoming annual general and special meeting on May 14. The concerned shareholders are urging want to help rebuild FSD Pharma by replacing its current board of directors (except for Anthony Durkacz) at the meeting. They hope to vote and elect five highly qualified and experienced candidates.

According to a Bloomberg report, Philip Morris International Inc. (NYSE:PM) is considering joining other cigarette producers with a jump into the booming marijuana industry. CEO Andre Calantzopoulos said the company is assessing factors including toxicity and efficacy.

HEXO Corp (NYSE:HEXO) announced on April 28 that its flagship Masson-Angers cultivation campus has received its Control Union Medical Cannabis Standard GACP certificate, which is the leading certification standard for medical cannabis cultivation.

Pyxus International (PYX), a global agricultural company, announced on April 29 that one of its indirect subsidiaries has entered into a term loan credit agreement with Pyxus and certain of its other subsidiaries. The credit agreement establishes a $120 million delayed-draw term loan credit facility, with a expiration date of July 2022.

Sundial Growers Inc (NASDAQ:SNDL) announced on April 23 that it has nearly doubled its commitment to SunStream Bancorp Inc. to $188 million from its previously announced commitment of $100 million.

Tilray Inc (NASDAQ:TLRY), a global pioneer in cannabis research, cultivation, production, and distribution, announced on April 27 that it has been included in the inaugural list of TIME's 100 Most Influential Companies. The new list highlights 100 businesses making an extraordinary impact worldwide.

22nd Century Group Inc (NYSE:XXII), a leading plant-based biotechnology company focused on tobacco harm reduction, low nicotine-content tobacco, and hemp/cannabis research, announced on April 26 that it fulfilled an order for 3.6 million of its variable nicotine content research cigarettes for independent scientific studies.