Earnings Preview: Twitter Inc, JetBlue Airways Corporation, and Freeport-McMoRan Inc

Social media stock Twitter Inc (TWTR), airline JetBlue Airways Corporation (JBLU), and mining firm Freeport-McMoRan Inc (FCX) will report earnings tomorrow

by Josh Selway

Published on Apr 25, 2016 at 2:04 PM

The busiest week of earnings season is upon us, and Tuesday's slate includes social media stock Twitter Inc (NYSE:TWTR), airline JetBlue Airways Corporation (NASDAQ:JBLU), and mining firm Freeport-McMoRan Inc (NYSE:FCX). Let's take a closer look at TWTR, JBLU, and FCX ahead of their earnings reports. 

  • Starting with TWTR, call buying has been popular leading up to tomorrow evening's earnings report. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows almost three calls have been bought to open for every put. This apparent optimism comes despite the fact that TWTR has traded lower in its post-earnings session six of the past eight quarters -- include the last four in a row. What's more, the options market is pricing in a brow-raising 18.8% post-earnings swing this time around. 

    On the charts, Twitter Inc has been a long-term underperformer, dropping over 67% in the past 12 months to trade at $16.95. More recently, the shares have been hitting resistance around the $18 level, while contending with the descending 80-day moving average. Considering the optimism in the options pits along with this ugly technical backdrop, another earnings miss could spell trouble for TWTR, from a contrarian perspective.

  • JBLU traders, meanwhile, are taking a more bearish route. Put volume is running 1.8 times above the average intraday rate today, thanks to heavy activity at the May 19 strike, where traders are buying to open contracts. As such, they're betting on JBLU falling below $19 before front-month options expire at the close on Friday, May 20. These bears may be anticipating a third straight post-earnings sell-off from the stock, which fell 6.3% after earnings in late January. Technically speaking, JetBlue Airways Corporation is down 10% in 2016, including a 0.5% drop today to trade at $20.34. In fact, the stock's last two breakout attempts were cut short by its 320-day moving average -- a level that previously acted as support. 

  • After a huge week that saw the stock close atop its 50-week moving average for the first time since September 2014, FCX has fallen 3.8% today to $11.23. Nonetheless, shareholders are counting on a third straight post-earnings move to the upside after tomorrow morning's report, while the options market is pricing in a lofty 12.5% one-day swing. Elsewhere, short-term options traders have had their sights set on puts. For instance, Freeport-McMoRan Inc's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.10, topping 73% of all other readings from the past year. Said simply, speculators targeting options that expire within three months are more put-skewed than normal. 

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