Price of the share has reached $17 on 18.04.2019, the investment idea brought about 17% yield in 15 days

TATA MOTORS (NYSE:TTM)

Ticker: TTM
Buy: market
Take profit: $17
Stop-Loss: $13.5

Tata Motors - one of the Tata Group companies - is an Indian multinational automobile manufacturer. The company includes the production of cars of different levels - from cheap Indian to global brands, as well as transport vehicles for various purposes – from trucks to military vehicles.

In its annual report, Tata Motors demonstrates an increase in domestic sales in 2018 by 16% compared with last year. The revenue of the entire concern boosted by 9.28% during the year. The company's net income for 2018 increased by more than 20% despite the fact, that the Jaguar Land Rover Group (JLR) acquired in 2008 generated losses for more than 4 billion US dollars in 9 months of 2018.

What happens to the JLR?

Sales in 2018 decreased by 4.6% compared with 2017. The main reason is the markets of China (-21.6%) and Europe (-7.8%). The purpose is the "trade war", aggravated in mid-2018. It was in the 2nd half of 2018 that Land Rover sales fell to 13.1 thousand cars against 27.4 in the first half of 2018. At the same time, JLR continues to fight for the Chinese market. After a three-year trial, the Beijing court ruled to suspend the sale of the British bestseller Evoque copy called Landwind X7. As we know, this is the original case in the global automotive industry. We believe that, together with a serious restyling, the Evoque JLR can regain region market share.

The fall in diesel sales in Europe caused by the Volkswagen scandal (FRA: VOW3) certainly hit the Land Rover SUV. But since 2018, most of the cars produced will be moderated hybrids – they will be able to contain a 48-volt battery to reduce emissions. In addition, the newest electric Jaguar I-Pace called the car in 2018 in Europe, confirms the advantages of Tata Motors. I-Pace should be serious competitors for cars Tesla.

The recent S&P credit rating reduction of JLR due to Brexit even will not affect the growth of car sales, moreover, if the group’s external financing becomes more expensive. According to the facts above, the potential growth in JLR auto sales will ultimately have a positive effect on the capitalization of the Tata Motors grou.

Analysis

Weekly trend is in the global downtrend channel (orange) since the beginning of 2015. The channel is clear with pronounced borders. According to the movement structure, an asset very often works out reversal patterns.

Purple lines indicate prices at which historical mirror support and resistance levels pass.

At the moment, a distinct “double bottom” pattern is drawn. It marks a local trend reversal. In the case of the weekly TF – it marks strong fall correction. Working out the entire figure height - and the first goal is the level of $ 17 for a depositary receipt. Further momentum conservation should bring the asset to the target mark of $ 20 for a depositary receipt. This number is confirmed by the center of the entire downstream channel. Reversal patterns from the borders of the channel tend to lead the price to their centers due to impulse. The further movement will be possible only with the preservation of favorable fundamental factors.

All indicators show strong bullish signals. There are triple convergences, both in stochastics and MACD. This feature additionally confirms the fact of price movement to $ 17, and after that - to $ 20.

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Tire industry

The profitability of this industry is highly dependent on the prices of raw materials, which are made from oil. From April to October 2018, oil demonstrated steady growth, breaking the 3.5-year-old maximum and trading at $ 65-75, that led to a stronger decrease in the quotes of most tire manufacturers relative to world indices. We believe now it is a good enter point to purchase the shares on this sector.

	Bridgestone	Continental	Goodyear	Michelin	Pirelli
Market Cap	29.773B USD	29.361B EUR	4.577B USD	18.92B EUR	6.15B EUR
Profit Margin	7.99%	6.78%	4.48%	7.56%	8.31%
PE Ratio (TTM)	11.44	9.85	6.79	11.28	15.05
Enterprise Value/EBITDA	5.16	6.49	4.84	5.43	7.74

Pirelli (BIT: PIRC)

Ticker: PIRC
Buy: market
Target price: 7€

The Italian company is the world's fifth largest tire manufacturer. After IPO and a significant capitalization increase in 2017, from January 29, 2018 Pirelli began a steady decline from 7.99€ to 5.50€, losing more than 30% of its value. Pirelli downside movement exceeded decline of European indices for the same period for about 4-5%.

At the same time, the company has the best margin rate in the industry with an annual increase in gross profit. We expect raw materials cost depreciation and a target price of 7€ per share.

	2018	2017	2016	2015
Net Income	431,600	176,392	135,063	1,738
Gross Profit	5,194,500	4,116,026	3,875,196	1,446,014

Technical analysis.

Year 2018. In the gap between October 10 and November 26, a “double bottom” pattern was formed, which could not realize its potential, and the price declined to new minimum values due to the fundamental reasons described above.

January 3, 2019 a key turning point came in sight. From this point, the trend went up according to all the canons of classical analysis. Bears stand on the defensive in the area of 6.10€ - 6.20€ per share. However, it is already clearly visible how the bulls are coming to the offensive with new forces. Every time the bulls’ preload becomes more dense.

The considered scenario is an “ascending triangle” figure, the breakthrough of which usually moves the price to the top of this punched triangle:


On the weekly we can see the complex and controversial situation, but both are considered in favor of bulls. The first option is an inversed head and shoulders, but with a bearish slope (such figures usually lead to a large-scale correction, but not a reversal of the trend). The second option is a double bottom (a head and right shoulder of the inversed head and shoulders figure).

Both options are directed on 7€ per share, which is confirmed by the daily schedule:


At the moment, the weekly indicators look very good and confirm the possible breakdown of the neckline of both reversal figures:


The Stochastic has gone beyond 80, the MACD has been growing steadily (working out triple convergence on the histogram and double on the lines). The RSI has broken through local resistance and is looking up.

Conclusion

We recommend to purchase Pirelli at current levels with a cost of 7€ per share.

Stop loss is quite complicated and not obvious here. The stop can be on price return back inside the reversal pieces with fixing below the center of these figures (the center is usually the decisive moment in the abolition of the reversal figure) or due to release of negative reports/news and the first strong red candle on weekly 1D.

Goodyear (NASDAQ: GT)

Ticker: GT
Buy: market
Target price 1: $26
Target price 2: $30
Stop-Loss: $18

American international company, manufacturer of tires and other rubber products, such as polymers for the automotive and industrial markets. The company is named after Charles Goodyear, inventor of vulcanized rubber. In terms of Enterprise Value / EBITDA, the company's shares are the most undervalued by the market, while the company pays dividends, which amounted to $0.60 per share over the last year. At the current price, it gives the right to looking forward to a 3% dividend income.

Technical analysis

Strong downside trend on all fronts. The weekly chart shows the bearish attitude and the suppression of any positive attempts of the bulls:


Everything would be very bad if it were not for one thing. The asset descended on the strongest, historical mirror resistance, which three times either stopped or unfolded the trend. Resistance range = $1 and is in the range of $18-19 per asset:


A rebound from this level confirms the bullish pressing, which is clearly visible on the weekly MACD. Four-fold discrepancy is a rather rare phenomenon. As a rule, shots from such discrepancies are very strong and they put the price to the entire height of the corrective movement in just a couple of weeks:


If the rebound takes place, the goals of the upward movement will be $22 and the range between $26 and $27, that corresponds to the upper limit of the downward projection. Subsequent growth will mark a hike to the upper boundary of the second downward projection, which takes place in the area of $30 per asset:

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Closed with Stop-Loss, loss is about 8,5%

Nvidia (NASDAQ:NVDA)

Ticker: NVDA
Buy: market
Take profit: $195
Stop-Loss: $160

Nvidia Corporation (more commonly referred to as Nvidia) is an American technology company incorporated in Delaware and based in Santa Clara, California. It designs graphics processing units (GPUs) for the gaming and professional markets, as well as system on a chip units (SoCs) for the mobile computing and automotive market. Nvidia is also now focused on artificial intelligence.

March 16, 2019 conference GTC19 took place, where Nvidia introduced its innovative solutions.

First of all, in April, a driver for the GeForce 10 family will appear, allowing the use of ray tracing technology previously available only to Turing RTX cards. The new release should show the technology advantages in games and stimulate the demand for more expensive video accelerators.

Secondly, a public release of Clara AI took place. Clara AI is a platform for radiology that helps diagnose diseases based on labeled data sets without the need to share patient images.

Thirdly, Nvidia announced Jetson Nano, a miniature computer for AI with 472 GFLOPS power and 5W power consumption. The assembly kit costs $ 99, with it you can create autonomous robots and drones.

Financial performance and prospects for 2019

In 2018, the revenue growth was 20.6%. In our opinion, it is an excellent indicator after 2 years of colossal growth of 40.6% and 37.6% in 2017 and 2016, respectively.

The deterioration in annual revenue growth occurred primarily due to a sales decline of 30.7% in 4Q2018, due to a demand collapse of GPUs for games by 46%, low demand for Turing models (RTX 2070, RTX 2080) and negative macroeconomic situation.

Nevertheless, we are looking forward to the recovery and growth in demand for GPUs in 2019 thanks to the gaming industry development, the growth of products based on artificial intelligence technologies and the improvement of self-piloted cars. In particular, the company Alphabet (Nasdaq:GOOG) announced a budget of $ 13 billion for the data centers construction in 2019. In the gaming field, Nvidia has announced the release of the Nvidia 1660 card with Tuting's graphics architecture, which justifies the invested money by impressive performance results.

Nvidia bought the Israeli company Mellanox (Nasdaq: MLNX), known for producing high-speed networks for supercomputers.

Acquisition of Mellanox (revenue for 2018 was $ 1088 million) will allow Nvidia to make up for lost revenue by the sale of GPU to miners. In the 2Q2018, the decline in sales of GPU for mining was more than 90 percent. ($ 18 million versus $ 289 for Q1 2018), and in Q4, Nvidia suspended the shipment of GPU for mining.

In other words, NVDA loses about $ 1 billion a year due to stagnation on the cryptocurrency market.

The acquisition of MLNX will also provide Nvidia by an additional increase in the sales of data center solutions, which amounted to 52% in 2018.

Weekly schedule

After a strong fall, the asset is trying to recover. Unlike many sector mates, NVDA lost more than half of the total value within two impulses. On weekly candles, it is very difficult to distinguish them. Only RSI and other “sharp” indicators can demonstrate a small double bottom.

On the one hand, this is positive – the asset is bought off in the form of the letter "V" - in the form of a spike. "Spike turns" are the strongest. As a rule, they mark a cardinal change in market sentiment or force majeure situations.

On the other hand, 80% of global trend reversals occur through the normal “double or triple bottom” distribution, which is clearly visible in the histogram and in the MACD lines.

NVDA weekly trend is trying to grow. But it is worse repeating that normal reversals occur either through the strongest weekly divergences (which do not exist now) or through reversal patterns. "Spikes" are extremely rare on the market. Based on this, the asset is able to “draw” the second bottom on the weekly TF, which means that the price may return to $ 130-140. Confirmation of this factor is an attempt to achieve a semi-annual moving average. Most likely, NVIDIA will succeed and should meet at ~ $ 180-185. Taking into account the momentum conservation, the price can get up to $ 190-200. After that, a regular correction should occur.


The figure above shows schematically the closest growth limit, where you can fix most of the long positions with the expectation of a deep correction (indicated by arrows). But, as a result, the price should still come to a normal Fibonacci distribution and make up 50-61.8% from the whole fall correction. This will be the final goal of the investment. The target zone passes in the range of $ 210-230.

Daily schedule

This is a medium-term trend. There is exactly what we mentioned in the first part. Reversal pattern "inverted head with shoulders" with an (unsuccessful) attempt to cancel and further shot at good volumes.

The purpose of the reversal figure price movement is always the height of this figure itself. In this case, the height is from the top (head) to the neckline (from $ 125 to $ 160). We add the difference to the figure exit point ($ 160) and get the target mark of $ 195. It turns out just the figure was discussed in the first part. $ 195 with an error will be the closest resistance interval, where the asset will be met by an army of bears with fairly large capital.

Summary

We buy an asset at market value, fix at $ 195. Next, we are waiting for script development. If we break through $ 200 and fix there for 1-2 weeks, then we can collect longs with targets for $ 230 again. If the asset price cannot consolidate above $ 200 and begins to be adjusted - wait for closing at $ 140 and recruit a position for a long time again.

The asset going down from current prices and fixing below $ 160 per share will provoke the cancellation of the whole scenario.

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Price of the share has reached target $175 on 23.04.2019, the investment idea brought about 14% yield from 08.02.2019

Autodesk Inc (NASDAQ: ADSK)

The world's largest supplier of software for industrial and civil construction, engineering, media and entertainment market. The company has developed a wide range of replicated software products for architects, engineers, constructors.

The company's product portfolio includes: AutoCAD, AutoCAD LT, Industry Collections, 3ds Max, Maya, Revit, Inventor, AutoCAD Civil 3D, CAM Solutions, Fusion 360, BIM 360 and Shotgun.

- In 2018, the Company began cooperation with Amazon for AI visualization products;
- The market capitalization for January 2019 is about 33 billion US dollars;
- ADSK surpassed the software industry, which grew by 25.2% over the past year;
- Nasdaq analysts expect the company to increase profits by an average of 38% per year in the next 5 years.

Autodesk systematically improves earnings per share over the course of the year:

in January 2018, the figure was: $ -0.79;
in April 2018: $ -0.38;
in July 2018: $ -0.18;
in October 2018: $ - 0.11.

In this case, according to forecasts, in March 2019 the company should show a positive result for the first time since May 2015. Quarterly revenue for 2018 increased by 20% and amounted to about 661 million US dollars according to a report at the end of October 2018 against 554 million US dollars as of January 2018.

On our opinion, there is also a positive trend in Autodesk shares should be provided by the completion of the transaction for the purchase of Building connected - the largest digital network in the construction industry, numbering 700,000 specialists

The company looks interesting on the daily and weekly charts. The daily trend was in a flat after rapid growth from January to August 2018. The correction occurred just in the period of the “collapse” of American indices (November - December 2018). At this time, steadily growing trend changed to the flat . At the end of December 2018, the uptrend was resumed.


At the same time, the weekly trend practically did not stop and even the events of the end of 2018 could not greatly affect the stability of the technological giant. On the weekly chart, the pattern of "double bottom" is clearly visible. According to the classical theory of technical analysis, the refinement of this pattern sends the price to the entire height of the formation from the breakout point. The graph shows projection points of a steadily growing channel. The upper point of the trend channel almost 1 in 1 coincides with the goal of testing the “double bottom” pattern. The growth target in this case is around $ 175 per share:


However, we must understand that the price may not rush to the mark of $ 175 without significant corrections after 5 weeks of rampant growth. Analyzing the daily chart, one can see strong mirror levels at the levels of $ 140 and $ 145, from which the price can push off, denoting the strongest uptrend.


All distribution deltas confirm the beginning of a new upward movement. Negative Stochastic is a bit late.

Total:

To medium-term investors, we recommend buying half of the estimated position at current prices and averaging over $ 140- $ 145 in case of rollback. Stop under a strong level of $ 140 (it is advisable to wait for the price to fix below this level for at least 3 days).

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