(FSLY) – Fastly Slowing Down- May 3,2021

Bearish – FSLY – $63.87

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Market Outlook:

Equities ended the week flat on Friday after what was a relatively choppy week despite SPY touching new all-time highs on Thursday. We see the RSP equal-weighted index outperform SPY in recent weeks which provides a positive outlook regarding a broad-based economic recovery that is impacting other sectors rather than just Technology. The dollar experienced a rebound this week after 3 straight weeks of decline. All eyes will be set on the employment data announcement this week which will give an indication as to the speed of the recovery and overall health of the economy. 

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FSLY Trade Idea:

On Friday’s Options Action show, Tony Zhang suggested a potential downside for FSLY heading into earnings. Despite reaching new all-time highs this year, FSLY has experienced a significant decline back below the $75 previous support level and has failed to break back above this level on multiple attempts. FSLY continues to underperform its’ sector (XLK) and the poor relative strength heading into earnings suggests further downside after the earnings announcement. View FSLY Trade

Sector Outlook

Most sectors ended the week in the green with the exception of Technology and Health Care declining 2.1% and 1.9% respectively. After weeks of providing leadership, Technology and Consumer Discretionary take a step back as we see Financials, Industrials and Communications gain momentum. 

XLI – Bullish

Our view on Industrials remains bullish as the economic recovery sees a pickup in demand. Support for XLI sits at $99.40. If price were to pullback to this level this week, it would provide an excellent long opportunity for industrials as price is currently near overbought levels. 

XLC – Bullish

Communications gapped up above the $77 resistance level after a positive earnings announcement for FB. However, XLC pulled back on Friday as price looks to retest the previous resistance which may now turn to support. A pullback to $77 will provide better risk/reward long entries.