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Market focus on US data, Tesla and Netflix remain strong buy

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By Naeem Aslam  

Thursday’s focus is going to be more on the US weekly unemployment claims data. This number has started to gather a lot of attention among traders as they continue to keep a close eye on the health of the US labour market.

A weak labour market means that the country could face a hard landing. As for the Fed, their next week’s meeting is all that matters now, and traders know that the Fed will increase the interest rate one more time.

At the same time, there is also this understanding that the Fed has reached its peak level when it comes to hiking its interest rate cycle.

In terms of the dollar index, this means that the path of least resistance is more likely to be skewed to the downside than anything else.

Looking beyond Tesla

Two stocks are going to be highly volatile on Thursday, as they were the main focus in the after-hours trading Wednesday: Tesla and Netflix.

Traders must know one thing about Telsa: it is not the story of margins anymore—one should not have been surprised about the decline in margins, basically as the car market was cutting prices to gain and maintain market share.

Basically, when it comes to Tesla, traders need to look beyond Tesla’s margin story; it is more about the autonomic system and the vast amount of data that it is sitting on.

In addition, Tesla’s charging station and its network, which other companies like Nissan will be using.

Traders also need to pay attention to the massive research and development investment that Tesla is making, which is primarily to gain access to an area of the EV market where it will have a much healthier margin and exclusivity.

Netflix

When it comes to Netflix, the earnings report clearly showed that the company’s plan to crack down on password sharing is working, as it gained over 6 million new subscribers.

Remember that this number never used to exist, and the company has created these new users, which is fascinating from a business point of view. However, given the current climate, the company hasn’t yet reached its full potential, as the cost of living crisis is keeping many on the sidelines and their accounts are being cracked due to password sharing.

But with improving economic conditions, this number should only move in one direction, and that is more improvement. There was also an impressive improvement in the free cash flow, which means that it will have the flexibility to invest that money at a lower cost as the cost of borrowing money is on the rise.

There is a possibility that the momentum in the price action that started in the after-market hours may continue on Thursday as most traders are doing nothing but booking some profit off the table.

But over all, we continue to think that with its new gaming subscriber business, password cracking, and healthy cash flow, the stock continues to remain a strong buy.

Bitcoin struggles despite positive news flow

The bitcoin price seems to be struggling somewhat despite the fact that every day we get really positive news for the sector.

For instance, if we pay attention to Tesla’s earnings, the company is Hodling, it is not in the mood to sell bitcoin, and Elon Musk didn’t say anything negative about Bitcoin either.

The overall narrative continues to become much stronger as the SEC has added a large number of bitcoin spot EFT applications to its register, which means that it is likely to approve all of them in just one go.

In terms of price action, we should see serious momentum coming in terms of the Bitcoin price, and the price should begin to trade above $35,000. However, looking at the price action, it appears that the bulls are really struggling on their side.

 

Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.