Bullish Signal on Hong Kong Fintech Firm has High Probability of Success
With current market conditions and with lockdowns around the globe, more and more people are working from home. It also appears more and more people are trading from home. The number of short-term traders and the hype around certain stocks is starting to remind me of 1999 and 2000. I hope the outcome is different this time around, but the demand for financial technology that helps people trade online is growing.
One firm in Hong Kong has seen tremendous earnings and revenue growth as a result of the trend. Futu Holdings (FUTU) and its subsidiaries provide investing services for Hong Kong, US and China Connect stocks, to individual investors through its proprietary one-stop digital platform, Futubull.
The company has seen earnings grow by 111% per year over the last three years while revenue has grown by 96% per year. Earnings jumped 1,800% in the third quarter as revenue jumped 276%. The stock itself is up over 300% so far in 2020, and that’s after a 20% pullback in the last month. The recent pullback brought the stock down to a support level in the $40.50 area—the high from earlier this year.
The stock fell to the support in early December and then bounced a little before dropping back down to retest the support. Now it looks as if the stock is turning higher again and Tickeron’s Trend Prediction Engine received a bullish signal on the stock on December 17. The signal shows that the odds of success are 90% for a bullish move over the next month.
The strong revenue growth has given Futu a high SMR Rating on Tickeron’s fundamental ratings and the huge jump in earnings has created a great P/E Growth Rating. The SMR Rating is a 16 and P/E Growth Rating is a 7. That means the company is in the top 16th percentile and the 7th percentile in these two categories.
On the technical side, the daily stochastic indicators were in oversold territory for a few days before making a bullish crossover and moving out of oversold territory on December 17. The stock also got a bullish signal from the Momentum Indicator on December 18.
The full outlook from Tickeron shows there are some concerns on both the fundamental and technical sides.
FUTU sees MACD Histogram just turned negative
FUTU saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on May 18, 2023. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 27 instances where the indicator turned negative. In of the 27 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
FUTU moved below its 50-day moving average on April 20, 2023 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for FUTU crossed bearishly below the 50-day moving average on April 24, 2023. This indicates that the trend has shifted lower and could be considered a sell signal. In of 12 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
The 50-day moving average for FUTU moved below the 200-day moving average on May 11, 2023. This could be a long-term bearish signal for the stock as the stock shifts to an downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where FUTU declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for FUTU entered a downward trend on May 26, 2023. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where FUTU's RSI Indicator exited the oversold zone, of 21 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 5 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
FUTU may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. FUTU’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.890) is normal, around the industry mean (3.562). P/E Ratio (12.048) is within average values for comparable stocks, (36.087). FUTU's Projected Growth (PEG Ratio) (0.000) is very low in comparison to the industry average of (2.241). FUTU has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.038). P/S Ratio (5.757) is also within normal values, averaging (105.280).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. FUTU’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 78, placing this stock worse than average.
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