Nasdaq notches 7-week win streak, and how much higher can Tesla power? 6/9/23

0:01Right now on Fast, the Nasdaq riding a seven week winning streak into the weekend while the S &P is up for the fourth straight week and crossed the 4 ,300 mark for the first time since last August. Heading into next week's Fed decision is now the time to jump on the bullish bandwagon. We'll debate that. Plus, charting Tesla's supercharged rally, the stock now up 11 days in a row, surging over 45 percent in just the last month. We'll go inside the numbers and ask the chart master where we go from here. And later, no beef on the street with Netflix, a battle royale on Royal Caribbean, and a burrito blowout on where Chipotle is heading next.

0:34I'm Melissa Lee. This This is Fast Money. We're live at the Nasdaq MarketSite on the desk tonight. Steve Grasso, Courtney Garcia, Guy Dami, and Bono and Eisen. And we start off with a nearly 10-month high for the S &P. The index crossing above the 4 ,300 level for the first time since August 16th today. It closed just below that mark, but still notches fourth up week in a row. Leadership, though, as you know, has been narrow. Only four S &P sectors are positive over that span, with tech and communication services leading the way. The Nasdaq up for a seventh week in a row. It is the index's longest winning streak since November 2019.

1:07The gains coming ahead of a big week for markets on the docket. New inflation data, Treasury Secretary Janet Yellen's testimony before the House Financial Services Committee, and, of course, the Fed's all-important decision on interest rates. So how should you position yourself going into this weekend? Grasso, are you bullish here? The market's where we are? Yeah, I'm bullish. And I think the natural thing would be that maybe we just entered into a higher trading range. So where we were at$3 ,800 and change, all the way up to$42 ,000, maybe now it's$43.50. You said it was August 2022. That level was$43.25.

1:43We kissed it, backed off it, and I think we could expand that to maybe$43.50. But everyone still hates this rally, which means that it probably goes higher. The problem I have, it's been too many consecutive days of bullishness. need to pull back, need some type of reversion trade, need everyone to sort of get their chips back on the table. I'm still bullish, but I need a breather from this momentum. I think people have been resistant because they keep waiting for the next shoe to drop. Like, how could it be that we we saw three banks go under effectively and there aren't any other fallouts here?

2:18How can it be that the Fed, you know, heights, hikes interest rates so quickly and so steeply? And still, we don't have any side effects of that in terms of a massive slowdown in the consumer and a recession. Yeah, which people have been calling for for now a year and a half, and it just hasn't materialized. And I think you're starting to get people realizing that the markets and the economy are in a better place than people realize. But I think what we really need to see with the markets right now is a larger breadth right now. We need not just eight to 10 companies that are leading this markets.

2:45We need to see it across the board. And I actually am still really optimistic that that will happen. But there's still a lot of really good valuation. So when you're looking this year, it really is basically eight stocks have led this entire rally. If you look at the other 495 and the S &P 500, they're actually collectively still down for the year right now. And there's still a lot of places you can take advantage of. So I would actually focus on those, not these things that are actually creating this new bull market that we're in right now. And breadth is expanding. It absolutely is. Yeah, I mean, for the Russell, up 1.9 % on the week, I'd.

3:14I mean, there are glimmers of hope here in terms of expansion, the breadth of this market. Yeah, without question. So I'll punch a hole in that and say, yes, clearly the Russell's up. But so much of that move is predicated on regional banks. And listen, it's fine. It's still rallying. But it's not necessarily rallying, in my opinion, because the economy is magically doing better. It's rallying because some of these regional banks have been beaten up and people are just trying to get ahead of what they think is the value trade, which may continue to work. But I look at the S &P at 4 ,300. We're probably trading close to 19 times this year's number.

3:46You know, 17 and a half next year's if we get there. And, you know, Stan Druckenmiller's comments are still sort of ringing in my ears from this week. 15 % to 20 % earnings decline that, you know, we have not seen on the back of 500 basis points of hikes yet. I'm surprised it hasn't affected the market. The lag effects lasted longer. But I think there's an inevitability to this entire thing, Mel. Yeah. Bonoan? Yeah, I think there's, to Guy's point, I think there definitely is a lag effect. There was a lag effect going into the whole inflationary pressures that led us in to the beginning of all the COVID relief and our expansion to the upside, multiple expansion.

4:23I think it will likely be the same story on this side. Listen, I've taken the pain. I fought the bulls and clearly they've won for the time being. But I really wonder if it's starting to become more of a pyrrhic victory where you get people piling in just at the precipice of downside. To your point, 550 basis points of hikes has yet to really be realized. And it's those concerns. Yes, we're all saying, what's the next shoe to drop? Several shoes have dropped. We've just gotten through this regional banking crisis. For me, it's cracks that are starting to show rather than the end of a catastrophe avoided.

4:59All right. So Bono and Guy are a little bit more reserved. Courtney, since you're a little bit more optimistic here, where would you be? S &P 500 or equal weight S &P 500? Um, equal weight SP100 is actually down a lot more so right now because the problem is, is those 10 companies. I mean, they take up about 26 percent of the SP100 right now, which is the problem. And those valuations are getting extremely stressed right now. So I would actually go more towards an equal weight because you're going to get a lot more exposure to the things that are underperforming right now. I mean, that goes to the point of do you see this market, this rally broadening?

5:32Do you see that broadening? Yeah. So one of two things are going to happen, right? When you have a lack of breath in the marketplace, either the rest of the market falls, or I should say those top 8 to 10 stocks crater as well, or the others catch up. Or maybe sometimes you get a little bit of both. I think you probably get a little bit of both. I think you're going to see expansion. Everyone was calling for the end of earnings, basically. Right? 8 to 10 percent or 15 percent or 20 percent earnings decline. That didn't happen. So you can continue to wait for the end. And I think these are all cyclical things.

6:07Eventually, we're going to have a recession. Is the recession now? Is it put off? Were we in a recession last year? And maybe some of the gains from the energy sector kind of masked the recession. Recessions are only in full focus after we've already gotten out of the recession where we could say, oh, we were in a recession. So waiting to trade on that has become a fool's errand within the marketplace. Stick with quality companies. Wait for a pullback and get back in. Yeah. Guy, do we need to know if if we are if we have seen a recession, if we're going into a recession? I mean, to Steve's point, if if we sort of work through that worry already in the stock market, maybe we've seen the impact on stocks, maybe not the economy, but the impact on stocks and earnings forecasts already.

6:54Yeah, maybe I'm not an economist, so it's hard for me to answer that question. I mean, it seems again, there seems to be an inevitability to that part as well on the recession. If you just listen to some of the commentary on a lot of these retailers, some of the manufacturers, it's a wide swath. I think we're all not. I shouldn't say that. I think the market, to a certain extent, is getting excited by things that are going to happen years from now, not necessarily today. And I think the Fed might actually surprise people next week. If you look at what the Bank of Canada did, that was a surprise.

7:22Now, it's a different set of circumstances. I get it. Inflation is a bigger problem there. Inflation is still a problem here without question. And I think, you know, the fact that things are seemingly as loose as they are gives the Fed a lot of ammunition to be a little more hawkish, I think, than a 4 ,300 S &P takes into consideration. I mean, we took a couple of surprises from various central banks this week in stride. I mean, you mentioned Bank of Canada, also Australia. And these are hikes after a pause, which is what we are expecting here for the Fed. And so it's curious to me, Courtney, at least, that the markets can can be fine with, OK, we're all on board this June pause.

7:57But whether or not we hike in July looks more and more likely. But they could hike again. I mean, we don't really know. There is no, quote unquote, end to the cycle per se. And the Fed has made that clear. And I think that's really what's not getting price into the market right now, because even if they do pause, which it does look like there's a good chance that they're going to pause next week, I think the idea is they'll probably still stay at this higher for a longer rate, whereas there's getting less and less of a likelihood that there's going to be cuts later this year, which people had been expecting as soon as just a couple of weeks ago.

8:28But yes, now people are actually looking at additional hikes. And that's where I think a lot of these large tech companies that have extremely stretched valuations, people have been running to those as a safety trade, but they're not pricing in the fact that we're in this higher for a longer rate environment. I think that's going to start to get pricing. If inflation has peaked, then you would think that the market should be bought at this point. But peak doesn't mean anything if it stays there. Inflation. If inflation has peaked, but it still remains high, maybe not at its peak. Right. That's still a problem.

8:56Yeah. If China doesn't come on the way that everyone thought the reopening of China was going to come back, then you have a potential for inflation to actually crater, not just not just peaked and stay the same. The global demand is down. Exactly. So you could see it and you want to be a buyer of the market in that case. So I think that's what people are focusing on. All right. Let's get to Tesla here. The stock's soaring 4 % today on the back of the GM charging network deal. The EV maker locking in 11 straight days of gains, tying its longest ever winning streak. Last week, the chartmaster said that Tesla was still heading higher.

9:31It is now up more than 21 % since that call. Is Carter going to say to stay long? Carter, what do you say? I mean, gosh, who knows? But my hunch is to take some measures. It's not just because it's up 11 sessions in a row. It's up a lot. There's been price discovery, if you will. It's also news related with this sort of joint venture thing going on, or at least collaboration with Ford and GM. But also today, with the gap gapped up at the open, that means there's unusual buying pressure. It used to be called a late open, of course. We don't have those anymore. But the stock faded. It didn't close all that well.

10:12So I think it's up maybe a bit ahead of itself. My hunch is to write some calls, to trim, to take some measures. We have two charts. Let's look at them, if you'd like. The first is, perchance, we've retraced remarkably exactly half of the peak the trough sell-off. We know that it was$415 at the high,$100 at the low, and here we are at$244 halfway back. The second chart of two, I just try to pick the downtrend lining effect since the high. Does it have to stop on that line? Of course not. But I think you trim. All right. Carter, thank you. We will see you in just a few minutes on Options Action.

10:54Steve, you took extreme measures when it came to your Tesla position. I did. So originally, when he had that chart up around$100, I bought my first leg at$105, sold it in the$190s, bought it back above$200, it, bought it again as it dipped below. And then just this, he alluded to it, or he said it, 11 straight up days. I think the future is extremely bright for Tesla going forward. I think that they have a monopoly in multiple areas within the EV networks. And I just want to see it like the overall market. I want to see it come back in a little bit, give me a better entry point. Took my chips off the table.

11:30We'll see. The optimism surrounding the charging network deals with Ford and GM is just, it's tremendous. I mean, Piper had an interesting note saying that Tesla could earn as much as$3 billion over the next seven years from these agreements, Bono. And I mean, if you liked Apple services revenue, maybe this is sort of the beginning of something like that. I mean, that you hit the nail on the head definitely speaks to recurring revenue, which you definitely like. I think really, you know, the question is about momentum and short-term trading activity. And to the other two previous panelists point, I just think it's a bit overstretched here.

12:03With that said, Tesla just seems to have a mind of its own. This stock could go up another 20 percent, 30 percent from this. And I don't think any of us would be surprised. So I think I'm with Carter in that. Not that I would be just shorting it here. But if I've already been in, Steve said he's in. He has about one hundred and five dollar cost basis. If I am in there, I'm definitely writing calls if I don't want to share, if I don't want to sell outright. But I'd probably be taking some cash and looking to deploy it elsewhere. where. Yeah. You sold that 105 tranche at 190. Yes. Yeah. And just to be clear, I'm out of the name right now.

12:35I want to take a look and see how it reacts next week. Yeah. Guy, next move. Higher or lower for Tesla? You look at Carter's charts. I mean, 50 % retracement, one, right up against the downtrend line, too. And we've been in this downtrend for a few years now. It's a pretty significant one. The bounce has been historic. But I mean, the trade that Steve just put on is fantastic. I mean, wait for a better entry point. I don't think this is the entry point to get long. GM was a winner in all of this too, Courtney, by the way, and Ford when it announced its agreement with Tesla. GM and Ford, yeah, which I think that's the, I think that kind of the bigger picture story with this is the batteries really are not as big of a high margin business for Tesla, but it's really going to help people get more into the EV space because you're still not seeing a majority of car ownerships go into EVs, but if it's a lot easier where people can drive for longer, it's easier to get charging stations, it's really going to benefit everyone involved.

13:25So it's kind of a, you know, beneficiary for everyone. Coming up, it hasn't been all about NVIDIA, Meta, and Tesla this year. There are lots of other stocks that are having strong 2023s. So how should we be playing them after their run? We will find out in later on Options Action, building for gains, home builders, or multi-year highs as one big player gets ready to report earnings. What you might expect in those results and how to play the moves. More Fast Money in two.

13:52Welcome back to Fast Money. Well, this year's rally has been largely driven by a handful of tech stocks, not just Nvidia and Tesla beating the market. Check out the moves and names like Royal Caribbean cruising 85 percent higher so far this year. Salesforce is up 61 percent. Amazon and Chipotle delivering spicy gains of nearly 50 percent. But which of these names have more gas in the tank? Let's find out with a little game of. Trade it or fade it. We're supposed to sing it? I don't know what happened to the audio of that. Well, it's supposed to go trade it or fade it. That's all right. OK, that's right.

14:29I guess we didn't hear it. It is a hot stocks edition. Let's kick it off with Royal Caribbean. Courtney, do you trade or fade this one? I would trade this. You've actually seen a lot of demand coming back into the cruise lines. And really, the pricing power, I think, has been extremely impressive here. And I think it still has a lot of room to run, especially considering it's about a 35 % to 45 % discount than land-based travel. And I think you're going to continue to see that benefit then. Bonoan. I think Courtney makes a lot of good points. And this company has definitely turned it around. But my argument is that they've really had to.

14:59If you look at the EV bloat on this company because of the debt, you're looking at$2.73 billion in quarterly debt payments. And I just wonder if the free cash flow bill will be long enough to service that over a long enough period of time and get this company to deliver. At 21 times, you're already paying more than you've paid for it in about a decade. So I'm fading it. All right, let's move on to Chipotle Mexican Grill. CMG, guy, always loves a good burrito blowout. Do you trade or fade this one? You know the answer to that, Mel. If you're looking for gas in your tank or gas anywhere else, for that matter, you want to stay in CMG.

15:33You know, 37 times sounds expensive. The problem is it's actually getting cheaper on the way up. So I stay with CMG traded. Steve. So I'm going to fade this one. And I know a guy's looking at it on chart and he likes that it's building the longer the base, the higher in space. And I know the way he thinks there, too. So it does look OK technically, but I think it's actually going to fail and close that gap. How many more? The bullish story about CMG is that they're going to open more stores. They're going efficiency right now. The stock price is probably priced to perfection. So I'll stay with the fade it.

16:09All right. Let's get to Salesforce. Bono and trade it or fade it. I'm going to trade this one. Now, for me, listen, the valuation is a bit stretched. I think it's about 28 or 29 times. But you really want to get down to are you buying growth at the right price? And I would argue historically, yes, particularly if you look at the PG ratio, which I think it's about 1.3, 1.4, which is cheap versus historicals. I think they've taken measures to kind of rein in costs. And ultimately, this is about me looking at, you know, things that have run, where they've been historically, and whether or not I still think there might be some incremental value.

16:43So I'm sticking with it. Guy, CRM. I'll go the other way. I'll fade it. And I'll say, if you stretch that chart out, you'll see, you know, Carter mentioned a 50 % retracement in Tesla. Well, you have the same thing going on here from the October 2021 high to the December 2022 low. We've just made a 50 % retracement. Big valuation. I think it does a back and fill here, Melms. All right. And finally, Amazon, Steve Grasso, trade it or fade it? Amazon, I'm going to trade this one. And I know the tendency is the market's run. This is the market. But they have a lot of levers to pull on the stock. And it has broken the long-term declining trend line.

17:19And I think AI is going to be a significant portion of what drives it as a tailwind going forward. I know it's counterintuitive. You think the market's going to take a step back. But Amazon still has legs. Courtney, I would fade this year. I do think this is it's a great company. It's a really great run up. But just at this kind of valuation, it's traded 84 times next year's earnings, which I just don't know what the catalyst is going to be to drive that further. Maybe it's A.I. We'll see. But I think in the short term, I would stay on the sidelines. All right. Coming up, our chart of the week.

17:47And this time, we are not spelling it with an A. The names that's now up five weeks in a row. How much higher can it go? We'll get some answers. And throughout June, CNBC is celebrating Pride Month. Here's a global head of partnerships for Houzz. The amount of stress and the emotional baggage that comes with hiding your own authentic self at work, it's immense. For the first 10 years of my career, I didn't come out and it just stopped me from performing to my true skills and my true capabilities. The second thing I would say, particularly for folks in hiring positions in organisations, is to go out and seek folks in the LGBT community, particularly in positions of leadership.

18:29It's really important for us to be able to look up to somebody who is in our community because it helps us have aspirations, just as all of us have aspirations in life.

18:50Welcome back to Fast Money. Time for our chart of the week. It is Netflix surging almost 5 % since Monday, now at highs not seen since last February. The streaming giant posting a fifth straight week of gains after starting its crackdown on password sharing in the United States. The company saw one of its largest ever jumps in new subscriber ads, this according to new data from Antenna. Bonoan, do you like Netflix here? You know, I do. I just it's really just you just can't afford to sell it because there still seems to be a perceived underlying tailwind of catalyst to the upside. I honestly thought that subscribers were no longer going to be the focal point.

19:27But I think traders are telling you that it still very much is. I just think at some point this new phenomenon of like the bump subscribers that they're getting from this crackdown is going to converge with their organic subscriber growth rate. And that's the only thing that I would kind of say look out for. Yeah, it does seem also that its competitors, Guy, are a little bit weakened in terms of their ability to pay up for content. So they are sort of stymied in this competition. Yeah, you know, maybe even the writer's strike has given them a little bit of a tailwind as well. There's a lot of things going on here for them.

19:57And listen, the stock's been unbelievable. When it was cheap on valuation, that's when it was a screaming buy. Now it's getting towards levels where it's been trading historically. Now you have to be a little more discerning, I think. So where it wasn't where it was impervious to the market over the last six months, I think it's going to start to fall victim. And if you think the markets do for something next week, I think you take some profits in Netflix here. Yeah, I would agree with that. I think it's definitely as a stretch valuation right now. But I do think when you're looking at the fact that they are tamping down on the password sharing, the estimates vary widely.

20:30Some people think this can add about two billion dollars in revenue. Some people as much as six billion dollars in revenue. So I think there is still such a wide range. And if this does add a lot more subscribers, they're expecting cancel off some upside. So I would say that is more short term, just considering how expensive it is. But it might be worth a look here. Netflix has the best interface or forward facing for the consumer. It's not even close. You go on any of these other streaming sites. They're terrible. They have deep pockets. To your point, they have all the content. But now when you start to crack down on on password sharing there, that's a finite amount.

21:02And I think out of the gates, it looks really impressive. I'd fade it. Are we still playing that game? No, but you just did, which is fine. Final trade time. Let's go around the horn. Guy Adami. If we're playing it, trade Gilead next week alongside. The game is over. Bono in. Final trade. I'm taking a look at Toll Brothers, although I'd probably be doing it with call options, given where the VIX is. Courtney. Bank of America. I think if you're looking for some good valuations, banks are still very cheap here. I just wanted to take a look at. Steve, do whatever you want. OK. All right. So I'm going to be a trader of this stock.

21:41So Micron would be my final trade. It got spooked by the China headlines. But I think as the smoke clears, that one's going higher. All right. That does it for us here on Fast Money. But do not move a muscle. We've got many more trades just ahead on Options Action on the other side of the break. Stay tuned.

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