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8/5/22 APEs Revolt & Tesla Splits

News:

Markets closed Thursday practically unchanged.

The Nasdaq gained 0.4%, while the rest of the indexes closed down 0.3% or less.

Beneath the surface, 52% of stocks advanced, while 43% declined.

Sector Review

The sectors were just as divided, 7 closed green while 4 closed red. Every sector except Energy (XLE) ended within 1% of its previous close.

Energy fell nearly 4%, following the supply and demand shifts we noted yesterday.

With that recap, let’s get to the big stories of the day…

APE Revolt

AMC (AMC^) held its earnings call after the close bell on Thursday. Its revenue soared, and its losses narrowed.

But that’s a side note at best now…

meme of ape withh text "Apes together strong."
Image from knowyourmeme.com

The theater chain declared a “special dividend” for shareholders of record on 8/15… 

Shares of AMC fell as much as 11% in after-hours trading.

  • The dividend will be paid on 8/22 
  • It includes one share of preferred stock
  • The shares will hold the “same economic and voting rights as … Common Stock.”
  • The new shares will list on the NYSE under the ticker APE A nod the Reddit group WallStreetBets.
  • APE shares will be worth 1% of a common share, with a possilbe conversion later.

Our take: The move is strange but is driving a lot of media hype. 

This might be a sneaky way to perform a stock split, but the whole thing wreaks of dilution.

Current shareholders should not take comfort in the move. The risk to any investment in AMC is now greater than ever.

No risk … no reward. Be careful.

Tesla Splits Again

Shareholders fell in line for Tesla’s (TSLA^) annual shareholder meeting.

Following the board’s recommendations, shareholders approved the 3-to-1 stock split and rejected “proposals focused on environment and governance,” according to a Reuters report.

  • TSLA last split in August 2020 by 5-to-1.
  • A date for the upcoming split has yet to be announced.

The final tally of the votes on all proposals is expected next week. We’ll keep you posted.

The Index

A few other notable headlines…

  • The Bank of England hiked interest rates by 0.5% to fight inflation … The largest hike in 27 years for the central bank.
  • New unemployment claims topped 250,000 for the third straight week.

Technicals:

A pullback is due.

The S&P 500 is at a critical resistance level, as you can see on the chart below…


SPY Daily Candles – Chart via thinkorswim

RSI levels for 3 of 4 major indexes are signaling overbought conditions.

Based on those two factors, a short-term slow down is in order. But we expect markets to continue with the bullish trend in the long term.

Timing:

The next two big events the markets will be reacting to are:

  • July’s jobs report drops this morning at 8:30.
  • The latest CPI inflation reading is due out on Wednesday, August 10.

Watchlist:

*Low Float
^Open Position

*GOVX has resistance at $4
*APDN has resistance at $6
*NNVC is on watch
DGII is on watch
TPIC has support at $17
COGT has resistance at $12
SIGA has support at $18
DCPH has support at $15
CELH has resistance at $110
ASRT has resistance at $4
GRBK has support at $28
ALDX has support at $5.50
RYTM has support at $15
VUZI has support at $8
GBT is on watch
CBAY has support at $3.50
INSM has resistance at $26
INVZ has support at $5
EDU has support at $25
ARRY has resistance at $17.50
TCRT has support at $1.50
GERN has support at $2
JOBY has support at $6, resistance at $7
GSAT has support at $1.50

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