Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Jun 3, 2020 at 4:39 PM
  • Market Recap

Better-than-expected economic data, most notably an impressive employment data report, bolstered optimism over the recovery of the economy as coronavirus-related lockdowns continue to ease. As a result, the Dow added 527 points, and locked in a third consecutive gain. Despite the civil unrest that continues to grip the U.S., the tech-heavy Nasdaq closed within a chip-shot of record-high territory. Meanwhile, the S&P 500 also finished notably higher, now up more than 40% from its March low. However, investors will keep a close eye on the civil unrest that continues to unfold. As of this afternoon, all four former Minneapolis police officers involved in the death of George Floyd have been criminally charged, with Derek Chauvin's original charge upgraded to second-degree murder.

Continue reading for more on today's market, including:

The Dow Jones Industrial Average (DJI - 26,269.89) added 527.2 points, or 2.1% for the day. Boeing (BA) surged 13% to lead the charge, while Walmart (WMT) paced the losers with a small 0.4% drop.

The S&P 500 Index (SPX - 3,122.87) ended 42.1 points, or 1.4%, higher, and the Nasdaq Composite (IXIC - 9,682.91) tacked on 74.5 points, or 0.8%.

Meanwhile, the Cboe Volatility Index (VIX - 25.66) slid 1.2 points, or 4.4%.

Closing Summary June 3

NYSE Nasdaq June 3

5 Items on Our Radar Today

  1. A report from ADP released today showed private payrolls fell by 2.76 million in May, the worst plunge in the survey's history when added with the 19.6 million in April. Economists expected a decline of around 8.75 million, but the reason for the large disparity is unclear. (CNBC)
  2. Factory orders fell 13% in April, 2% more than the previous month, and just above economists' expectations, according to a report from the Commerce Department. Meanwhile, durable goods fell a staggering 17.7%. (MarketWatch)
  3. This Dow stock is the best to own in June.
  4. Coty stock rises on possible Kardashian deal.
  5. Bulls swarm surging Zoom stock.

Earnings June 3

 

Unusual Options Activity June 3

Data courtesy of Trade-Alert

Oil Volatile Amid Looming OPEC+ Deal

Despite continuing improvements to demand, oil prices teetered between gains and losses during a volatile trading session. Additionally, doubts came to light regarding the timing and scale of a potential extension to the pact between The Organization of the Petroleum Exporting Countries and others (OPEC+). As a result, July-dated oil gained 48 cents, or 0.6%, to settle at $37.29 per barrel.

Gold continued its losing streak, as risk sentiment improved on hopes of recovery from the economic slump brought on by the coronavirus pandemic. Overlooking the civil unrest in the U.S., gold for August delivery fell $29.20, or 1.7%, to settle at $1,704.80 per ounce -- marking its lowest close in three weeks.

Published on Jun 3, 2020 at 8:44 AM
Updated on Jun 3, 2020 at 2:42 PM
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Published on Jun 3, 2020 at 2:37 PM
Updated on Jun 3, 2020 at 2:41 PM
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Published on Jun 3, 2020 at 1:34 PM
  • Best and Worst Stocks
  • Quantitative Analysis

Last week, we looked at a list of the best performing S&P 500 stocks in June, going back 10 years, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Today, we'll be breaking down another name on the list, medical supply manufacturer Edwards Lifesciences Corp (NYSE:EW), which is also flashing a historically bullish technical signal on the charts. 

During the last decade, EW averaged a 6.4% one-month return in June, with nine out of 10 returns positive. This is good for second-best overall and the second-best healthcare stock out of the eight that also made their way onto the list. 

This isn't the only historically significant data that could work in EW's favor. The equity just came within one standard deviation of its 40-day moving average, according to a study from Schaeffer's Quantitative Analyst Chris Prybal. This study shows four similar moves occurring in the last three years. EW was higher one month after three of these four signals and averaged a one-month return of nearly 4%. A similar move, from the stock's current perch at $74.32, would put it just below the $78 -- a region the stock hasn't closed north of since late-February. 

A closer look shows EW staging an impressive bounce off its mid-March bottom, up over 44.3% since its March 23 annual low of $52.41. While the security has petered off just below the $76 level, which coincides with the security's year-to-date breakeven, in recent months, several extra layers of resistance, including the 320-day moving average have come into play. Year-over-year the stock boasts a 28% gain. 

Options bulls are already on board. In the past two weeks, 3.18 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 94% of all other readings from the past year, too, suggesting a much healthier appetite for long calls of late. 

That being said, for those wanting to speculate on EW's next move, options look like a prudent play. The equity's Schaeffer's Volatility Index (SVI) of 32% stands in the 15th percentile of its annual range. This means the options market is pricing in relatively low volatility expectations at the moment. 

Published on Jun 3, 2020 at 1:32 PM
  • Options Recommendations

Medical technology provider Danaher Corporation (NYSE:DHR) has pulled back to its 40-day moving average, a historically bullish trendline. This area also happens to coincide with the 20% and year-to-date breakeven levels. So with the shares flagging in a cup-and-handle bullish pattern, and additional levels of support on the charts, there's reason to believe DHR has room to run on the charts.

WKALT Stock Chart DHR

 

Meanwhile, in the options pits, DHR sports a 10-day put/call volume ratio of 3.64 at the International Securities Exchange (ISE), CBOE Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 88th percentile of its annual range, suggesting a healthier-than-usual appetite for long puts as of late. In other words, an unwinding of these bearish bets could help push the security higher.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.20 sits higher than 77% of all other readings from the past year. In simpler terms, short-term option players have rarely been more put-biased in the past 12 months. Digging deeper, there is peak put open interest located at the 150-strike, an additional layer of options-related support that could unwind and serve as a floor.

Lastly, now looks like an affordable time to purchase DHR options. This is per the stock’s Schaeffer's Volatility Index (SVI) of 26%, which sits in the 10th percentile of its annual range. Our recommended call option has a leverage ratio of 6.5 and will double on a 15.1% surge in the underlying stock.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this DHR commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Published on Jun 3, 2020 at 1:00 PM
Updated on Jun 3, 2020 at 1:00 PM
  • Intraday Option Activity
  • Earnings Preview
Navistar International Corp (NAV) is surging ahead of its fiscal-second quarter earnings report; however, history shows a mostly negative outlook following such reports.
Published on Jun 3, 2020 at 12:11 PM
  • Midday Market Check

This morning's promising employment data is keeping the wind at stocks' backs today, with Dow Jones Industrial Average (DJI) up more than 400 points and reclaiming the 26,000 level. The S&P 500 Index (SPX) and Nasdaq Composite (IXIC) are also enjoying outsized gains, with the former vying for its biggest 50-day bounce in history. Reopening optimism is giving the airline sector a boost, while traders turn away from lockdown staples like Netflix (NFLX) and Amazon (AMZN). Meanwhile, oil prices are taking a breather, with July-dated crude down 0.7% at last check, dampened by uncertainty over the timing and scale of the Organization of the Petroleum Exporting Countries' (OPEC) agreement to cut crude production. 

Continue reading for more on today's market, including: 

  • Breaking down the best Dow stock to own this month, historically. 
  • Analysts are abuzz after Zoom doubled its full-year sales outlook.
  • Plus, auto sales data drives NIO higher; FDA approval helps pharma stock break out; and EVFM sinks after stock offering. 

Midday Market Stats June 3

There is an unusual amount of options activity surrounding Chinese electric car manufacturer NIO Inc (NYSE:NIO) today, as the stock continues its climb amid news that car sales in China are up for their second straight month. So far, 266,000 calls and 44,000 puts have crossed the tape -- total options volume that is eight times the intraday average and ranks in the 99th percentile of its annual range. Most popular are the June 6 and 6.50-strike calls, with positions being opened at both. At last check, NIO is up 15.6% at $5.43, set for its highest close in over a year and a half. 

The best stock on the Nasdaq today is FSD Pharma Inc (NASDAQ:HUGE) after the Canadian biotech company was granted approval by the Food and Drug Administration (FDA) to design and submit for clearance a clinical trial to test its potential COVID-19 treatment. The equity is up 206.5% to trade at $9.50, and just cleared its 120-day moving average, which has served as a long time area of pressure on the charts for HUGE.

On the other end of the spectrum, Evofem Biosciences Inc (NASDAQ:EVFM) is one of the worst performers on the Nasdaq today, down 25.9% at $3.45. This comes after the drug developer made an underwritten public offer of 28.5 million shares priced at $3.50 a share -- a 25% discount to last night's close -- in order to raise $100 million. This dip puts EVFM right back by its mid-March one-year lows and off 43.5% for the year.  

Published on Jun 3, 2020 at 11:32 AM
  • Buzz Stocks

The shares of Tiffany & Co (NYSE:TIF) are down 1.1% at $115.73, after reports that the $16.2 billion takeover of the jewelry brand by French luxury group Louis Vuitton SE (LVMH), is looking less certain. LVMH's board is concerned about a deteriorating situation in the U.S. market as well as Tiffany & Co's debt. However, Credit Suisse noted that it would be short-sighted for LVMH to avoid the deal, and would make its dealings less credible in the future. Looking ahead, the jewelry name is scheduled to report earnings a week from today on Wednesday, June 10, before the open.

Trading sideways since late March above $125 region, yesterday's drop of around 9% put TIF back below the $120 mark for the first time since mid-March. From a wider perspective, the equity is down 12.9% year-to-date. 

Analysts are hesitant in the options pits, with all fifteen in coverage sporting a tepid "hold" rating. Meanwhile, short interest has fallen 10.5% in the last two reporting periods, now making up 10.44 million shares. This accounts for 8.7% of the stock's total available float and would take a little over three days for shorts to cover, at TIF's average pace of trading.

 

Published on Jun 3, 2020 at 11:26 AM
  • Buzz Stocks

The shares of Coty Inc. (NYSE: COTY) are up 6.5% at $4.47 this morning --one of the best stocks on the New York Stock Exchange -- after the cosmetics company disclosed it is in talks with reality TV star Kim Kardashian West over a possible collaboration on a line of beauty products. Coty already has a majority stake in Kylie Jenner's makeup and skincare line, though the $600 million acquisition recently came under scrutiny and shares shed 13.4% on Friday, after Forbes magazine alleged Jenner overplayed the value of her cosmetics brand.

Despite the potential new line and yet another CEO change, COTY is trying to bounce back from a steep mid-May fall near to its March lows around $3. Overhead pressure is still strong at the 30-day moving average, despite news of the collaboration. Nevertheless, the shares sport a 23% month-to-date gain already. 

Additional gains could come from a short squeeze. Short interest is up 39.97% in the most recent reporting period to 28.29 million shares, the most since November. This makes up roughly 10% of the stock's available float, which could fuel more gains should pessimism begin to unwind. 

What's more, short-term traders have been targeting calls at a rapid rate, according to COTY's Schaeffer's put/call open interest ratio (SOIR) of 0.21, which sits in the low 3rd percentile of its annual range. This indicates that short-term traders have rarely been more call-biased during the past year.

Published on Jun 3, 2020 at 10:29 AM
  • Best and Worst Stocks
  • Quantitative Analysis
  • Editor's Pick

Last week, with the help of Schaeffer's Senior Quantitative Analyst Rocky White, we broke down the best S&P 500 stocks to own in June over the past 10 years. Just two Dow stocks made the list, the best being UnitedHealth Group Inc (NYSE:UNH), which is a welcome sign for a red-hot stock boasting a 22.8% quarterly gain.

More specifically, looking back over the last decade, United Health stock boasts an average June return of 3.1%, with nine out of 10 returns positive. As previously mentioned, that's good for best blue chip on the list, and sixth-best in the healthcare sector. 

Breaking down UNH even further, the stock was last seen trading at $306.31 today, and just came off its seventh consecutive daily win. The shares are six days removed from a May 28 record high of $309.66, with their 30-day moving average emerging as solid support in the last month.

Daily Stock Chart UNH

In the options pits, puts hold a distinct advantage. UNH's 10-day put/call volume ratio of 1.15 at the International Securities Exchange (ISE), Cboe Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits four percentage points from an annual high. And echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.12 ranks in the 88th percentile of its annual range, implying short-term options traders have rarely been more put-biased. 

Whatever the motive, near-term UNH options can be had for a bargain at the moment. The security's Schaeffer's Volatility Index (SVI) stands up at 30%, in the 15th percentile of its annual range. This indicates that now is an attractive time to jump aboard the blue chip with options.

Published on Jun 3, 2020 at 10:21 AM
  • Buzz Stocks
  • Intraday Option Activity
Food producer Campbell Soup Company (NYSE:CPB) entered the earnings confessional this morning, reporting third-quarter profits and revenue that came in higher than analysts' estimates.
Published on Jun 3, 2020 at 9:55 AM
  • Buzz Stocks
  • Analyst Update
The company nearly doubled its annual sales forecast, too, blowing Wall Street's estimates out of the water, though it did warn that its gross margins would likely stay below historical norms, adding that its costs were rising sharply. 

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