eyeQ: where now for Shell shares?
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. This is what it thinks of this widely held FTSE 100 stock.
17th December 2024 11:05
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Shell
Macro Relevance: 71%
Model Value: 2,628.96p
Fair Value Gap: -9.18% discount to model value
One of the key themes for investors in 2025 is going to be China and whether the authorities stimulate policy enough to spur a bounce in the economy. Positive noises in September prompted a sharp rally, but that was unwound in October.
And sadly it feels like the latest excitement is going the same way. FXI, the popular iShares China Large-Cap ETF tracking Chinese stocks, bounced 10% early in December on hopes of policy stimulus. But it has fallen 8% subsequently.
When markets fret over weak Chinese economic activity, it tends to weigh on commodity markets and energy stocks. So, a weak retail sales report out of China yesterday prompted a sell-off in crude oil and the likes of Shell (LSE:SHEL). Except in Shell’s case, we may have moved into overshoot territory.
eyeQ model value is flatlining, i.e. the broad macro environment is neutral, awaiting a clear direction. So, the machine isn’t massively bullish on the stock; it’s more the case that this latest move lower has gone too far relative to prevailing macro conditions.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
Please note that our article on this investment should not be considered to be a regular publication.
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