Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Sep 13, 2021 at 11:32 AM
  • Buzz Stocks

Chinese tech concern Alibaba Group Holding Ltd (NYSE:BABA) is down 1.4% at $164.21 this morning, struggling after a Financial Times report claimed the Chinese government is looking to put a halt to Jack Ma's Ant Group's payments company, Alipay.

BABA has not fared well on the charts since hitting its Oct. 27 record high of $319.32, now down 28.6% for 2021. Overhead pressure from the 30-day moving average has also been a factor in the stock's downtrend, as well as the long-term weight of the chip shortage and the Chinese government's broader crackdown of tech.

Despite its run lower, analysts remain heavily optimistic towards the security. Heading into today, 14 of the 15 covering firms boast a "strong buy" recommendation for BABA.

Similarly, options traders seem optimistic, with calls popular. Specifically, BABA's 10-day put/call volume ratio of 3.06 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 75% of readings in its annual range.

Published on Sep 13, 2021 at 10:29 AM
  • Buzz Stocks

The shares of Walt Disney Co (NYSE:DIS) are relatively unchanged after the blue-chip name announced it would show new releases exclusively in theaters for the remainder of the year, before making them available on its Disney+ streaming service. The success of recent titles such as "Shang-Chi and the Legend of the Ten Rings," which enjoyed $94.7 million in ticket sales at U.S. and Canadian theaters over Labor Day weekend, is driving the decision. 

Disney stock is testing its footing near its year-to-date breakeven level, though it has added nearly 40% over the last 12 months, and just came off its third consecutive weekly win. The stock was last seen up 0.5% at $184.92, while  the 10-day moving average sits just below as a level of support. The 200-day moving average is also providing a floor, after helping capture several pullbacks in the past year. 

Sentiment surrounding the media giant is optimistic. Of the 17 in coverage, 14 say "buy" or better, and three say "hold." Meanwhile, the 12-month consensus price target of $210.23 is a 14.5% premium to current levels. 

Now looks like the perfect  time to speculate on Disney stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 23% stands higher than 11% of readings from the past year. This means options traders are pricing in relatively low volatility expectations for DIS at the moment. 

Published on Sep 13, 2021 at 9:25 AM
Updated on Sep 13, 2021 at 9:35 AM
  • Opening View

Stock futures are on the rebound this morning, with all three major indexes reversing course from Friday's steep losses. The Dow Jones Industrial Average (DJI) is up 230 points in electronic trading, a remarkable bounce from last week, which marked its longest losing streak since June. Covid-19 infections look to be trending lower in the U.S., and whispers that Pfizer's (PFE) vaccine could be approved for kids ages five to 11 are also catching investors' attention. Futures on the S&P 500 Index (SPX) and the Nasdaq-100 Index (NDX) are notably higher as well.

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

  • Options traders responded to Affirm stock's revenue beat.
  •  Behind Zumiez stock's post-earnings options buzz.
  • Plus, DELL's big bull note; the Chinese tech giant under pressure; and gambling name gets analyst praise.

FuturesSept13

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.9 million call contracts traded on Friday, compared to 1,053,026 million put contracts. The single-session equity put/call ratio rose to 0.53 and the 21-day moving average stayed at 0.51.
  2. Dell Technologies Inc (NYSE:DELL) is up 2.4% in electronic trading, buzzing after being added to Goldman Sachs' "Conviction Buy" list. The brokerage firm praised the company's strong financial standing, including debt and cash flow. DELL has enjoyed a 29.9% climb in 2021.
  3. Chinese tech concern Alibaba Group Holding Ltd (NYSE:BABA) is 1.8% lower heading into Monday's trading, struggling after a Financial Times report claimed the Chinese government is looking to put a halt to Jack Ma's Ant Group's payments company, Alipay. BABA has struggled on the charts, and is down 27.7% in 2021.
  4. MGM Resorts International (NYSE:MGM) is moving 2% higher in early trading. The stock is enjoying a fresh bull note from Bernstein, who upgraded the equity to "outperform" from "market perform." The analyst cited the company's real estate portfolio and its presence in the sports and gaming betting field. Over the past 12 months, MGM has surged more than 85%.
  5. Today's economic data is slow, with only the Federal budget balance on deck.
OV Buzz Chart Sept 13 

European Stocks Move Higher Ahead of Inflation Data

Asian markets were mostly higher today, despite a broader pullback from tech stocks. E-commerce giant BABA was a notable loser, shedding 4.2%, on the aforementioned news. Hong Kong’s Hang Seng lost 1.5%, while China’s Shanghai Composite managed a 0.3% win. Elsewhere, South Korea’s Kospi gained 0.1% and Japan’s Nikkei added 0.2%, despite a lackluster outing from auto stocks Toyota and Honda.

Meanwhile in Europe, stocks are climbing, as investors gear up for the latest inflation readings later this week, after the European Central Bank’s (ECB) interest rate decision last week. At last check, London’s FTSE 100 is up 0.8%, the French CAC 40 sports a 0.9% lead, and the German DAX is 1.1% higher.

Published on Sep 13, 2021 at 9:27 AM
Updated on Sep 13, 2021 at 9:27 AM
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Published on Sep 13, 2021 at 9:06 AM
  • Monday Morning Outlook

“… a move above 4,475 would bring the next resistance area immediately into focus, with the round half-millennium 4,500 level a potential barrier. Moreover, the 4,507 level is a round 20% above last year’s close. Round-number year-to-date (YTD) percentage returns are sometimes important, marking resistance or hesitation areas…the SPX chopped around its round 10% YTD gain for about a month-long period in April and May.”

          -Monday Morning Outlook, August 30, 2021

“…here we are, stocks have entered a seasonally weak periodthe S&P 500 Index (SPX—4,535.43) may have reason to stall, as the index trades at a level that represents a round 300% return over the past 120 months, or rolling 10 yearsFriday saw a bearish ‘tri-star doji’ pattern, which occurs when the opening and closing prices are the same or about the same for three consecutive days. These are multi-day reversal patterns that have signaled short-term weakness a few times already this year, including late April.”

          -Monday Morning Outlook, September 7, 2021

If you are a large-cap technology investor with sizeable investments in the Invesco QQQ Trust Series (QQQ—376.59) or the Technology Select Sector SPDR Fund (XLK—156.63), two exchange-traded funds that have traded at all-time highs in a narrow range during the past two weeks, you probably have not noticed the pullback in the broader market, as measured by the S&P 500 Index (SPX—4,458.58). 

The SPX pulled back from a general area that I observed could create short-term challenges for the index, as it approached a round 20% above last year’s close, plus a level that is coincident with a round 300% 10-year rolling return, and the 4,500 half-millennium level. The SPX did push above 4,500 and 4,507, albeit briefly and coincident with a bearish short-term technical pattern emerging that also reared its ugly head in January, February and late-April.

Specifically, as I mentioned in my concluding remarks last week, the SPX’s candle on Friday, Sept. 3 completed a three-day Japanese candlestick pattern, known as a “tri-star doji.” This pattern is defined by three consecutive days in which the underlying closes at or around its opening price. 

Such patterns typically hint at a reversal, which in this case, a pullback from the SPX’s all-time highs, achieved in the first trading days of September, which is well-known for its weak seasonality.

When the “tri-star doji” patterns surfaced in January, February, and April, they preceded mild SPX declines from around the top rail of a channel that the SPX has been trading mostly within since mid-November last year. The declines pushed the SPX to levels slightly below the lower rail of this channel. In fact, trading below the lower rail lasted only a few days at most, as robust rallies from the 50- or 80-day moving averages quickly pushed the SPX back into the bullish channel.

If there is work to be done with respect to the current decline, the first level of support during September expiration week is in the 4,475 area, which is both double the SPX’s 2020 closing low and in the lower rail of its channel, which ranges between 4,455 to start the week and 4,475 at Friday’s close. 

If a move below this rail is in the cards, which occurred after the January and February “tri-star doji” patterns, the rising 50- and 80-day moving averages could be supportive, which come into the week at roughly 4,425 and 4,350, respectively.

mmo chart 1

Just like last month, the CBOE Market Volatility Index (VIX) experienced a pop around expiration. Just as it pulls back to big put open interest strikes, it is as if there is a concerted effort to ensure most or all the put open interest at put-heavy strikes expires worthless.”

          -Monday Morning Outlook, August 23, 2021

“…volatility has emerged as a semi-predictable occurrence recently, a presence once recognizable only to specialists but now drawing the attention of an ever-larger crowd on Wall Street… What all these things have in common is they happened around the third Friday of the month

            -Bloomberg, August 28, 2021

Just as weak September seasonality has been a theme in the media, another emerging theme I am noticing is weakness during expiration week. Bloomberg News, as excerpted above, picked up on it late last month, and CNBC television made light of expiration week weakness during its programming last Thursday. It may be coincidental, but I find it noteworthy that during this period of weak seasonality, at least four brokerages turned short-term cautious last week. 

It is very tempting to draw bullish contrarian conclusions from the caution that is being broadcast, as these brokerages became wary last week amid well-known negative seasonality factors, but within the context of a bull market.

During the past few months, I have written about the expiration weakness, especially as it portends to the huge build in VIX futures put open interest from month to month this year. My observation has been that CBOE Market Volatility Index (VIX—20.95) futures suddenly rally from the largest put open interest strikes around expiration, causing these contracts to expire worthless. In prior years, we would see the opposite occur, as it was not unusual to see 90% or more of the call open interest on VIX futures expire worthless.    

In fact, September’s VIX futures open interest configuration looks a lot like the open interest configuration of prior months this year (September VIX expiration occurs on Wednesday morning, unlike Friday afternoon for most other index and equity options). 

The good news for bulls is that at Friday’s close, the VIX September futures contract comes into the week above the 18 level. This is important because the VIX’s heaviest put open interest strikes are at 15 through 18. With Friday’s close at 20.95, there is room for the September volatility futures contract to decline to 18 or higher upon Wednesday morning’s settlement, paving the way for a plethora of VIX futures put open interest at the 15 through 18 strikes to expire worthless, even if stocks rally or are at least trading above Friday’s close at Wednesday morning’s settlement. 

Moreover, per the second graph below, I don’t see anything in the SPDR S&P 500 ETF Trust (SPY—445.44) open interest configuration that will cause unusual volatility from an option open interest perspective. There could be a little bit of additional selling tied to the heavy call open interest at the 450 strike, since most of these contracts were bought (to open). However, such selling would push the SPY to levels that have been supportive in 2021 and we there is not an immediate threat of delta-hedge selling related to big put open interest strikes acting as magnets.  

I point this out from the perspective of trading with a contrarian mindset this week. While nothing is a guarantee, there are strong supporting factors in the option market to take the other side of the expiration week increases in volatility that have been well documented by the financial media in recent weeks.   

MMO chart 2

MMO chart 3

Todd Salamone is Schaeffer's Senior V.P. of Research

Continue Reading:

Published on Sep 13, 2021 at 7:21 AM
  • Buzz Stocks

Today's Stock Market News & Events: 9/13/2021

by Schaeffer's Digital Content Team

While investors prepare for a seasonally weak period, the economic landscape will keeps turning this week. Mid-September is full of economic data, starting with a Federal budget balance update on Monday. Tuesday features consumer price index updates, including the core CPI.

The pace seriously picks up on Wednesday, with a deluge of data due out, like the import price and Empire state indexes, while Thursday features more initial and continuing jobless claims updates. Key preliminary consumer sentiment data will be released on Friday, to carry investors into the weekend. 

JinkoSolar (JKS), Lennar (LEN), and Oracle (ORCL) are all set to release reports this week.

Today comes with a Federal budget balance update. 

The following companies are due to release quarterly earnings today, September 13:

Oracle Corp. (NYSE:ORCL -- $89.68) provides products and services that address enterprise information technology environments worldwide. Oracle will report its Q1 earnings of 2022 before the bell today.

Looking ahead to tomorrow, Tuesday will feature the National Federation of Independent Business' (NFIB) small-business index, as well as CPI and core CPI updates.

All economic dates listed here are tentative and subject to change.

Published on Sep 12, 2021 at 4:43 PM
Updated on Sep 13, 2021 at 5:56 AM
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Published on Sep 13, 2021 at 5:53 AM
Updated on Sep 13, 2021 at 5:55 AM
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Published on Sep 13, 2021 at 5:44 AM
Updated on Sep 13, 2021 at 5:53 AM
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Published on Sep 10, 2021 at 4:29 PM
  • Market Recap
  
Published on Sep 10, 2021 at 12:39 PM
Updated on Sep 10, 2021 at 2:25 PM
  • 5-Minute Market Rundown

The holiday-shortened week has the major indexes taking a step back, as sentiment surrounding the economy goes south, and investors start speculating on whether September's infamously volatile seasonality is here to stay. The Dow Jones Industrial Average (DJI) saw a dramatic triple-digit slide on on Tuesday when markets reopened, while it was joined by the S&P 500 Index (SPX) in extending its daily losing streak to two. The Nasdaq Composite (IXIC), meanwhile, brushed off some of the negativity sparked by souring analyst sentiment, hitting yet another record closing high.

Wednesday was more of the same in regards to growing pessimism among traders, and the Dow and S&P 500 both logged their third-straight day of losses, while the Nasdaq also took a step back. On top of a record rise in job openings for July, the Federal Reserve's "Beige Book" indicated a moderate downshift in overall economic growth. 

While stocks explored both sides of the breakeven on Thursday, the Dow and S&P 500 both strung together their fourth-straight losses, as uncertainty over the Covid-19 delta variant led several airlines to lower their forecasts. As of this writing, all three indexes are eyeing a weekly drop, while the Dow and S&P 500 are gearing up for their fifth-consecutive daily skid. 

Stocks Getting Analyst Love This Week 

It wasn't all doom and gloom from the brokerage bunch this week. In fact, several stocks enjoyed upgrades from analysts amid all the volatility. Barclays upgraded Cirrus Logic (CRUS) to "overweight," citing opportunities with Apple (AAPL) and Alphabet (GOOGL). Meanwhile, another tech name Spotify (SPOT) saw an uptick in bullish options trading after KeyBanc upgraded the equity to "overweight." Macy's (M) also saw a rare bull note. Cowen upgraded the stock to "outperform," commending the department store staple on its shift to digital

Earnings Continue to Trickle In 

While earnings season has slowed to a mere trickle, several major names are still making waves in the confessional. Famed meme stock GameStop's (GME) quarterly report was front-and-center this week, and with dismal results. Zumiez (ZUMZ) also plummeted after earnings, though it created quite a stir among options traders. Buy now pay later (BNPL) name Affirm (AFRM) had better luck, surging after a revenue beat and inviting plenty of bull notes. Meanwhile, options volume surged on Dave & Buster's Entertainment (PLAY) stock ahead of its quarterly report on Thursday evening. 

Federal Budget Balance on Deck Next Week

The Federal Budget balance will kick off next week, while investors have plenty to look forward to, including an update on the consumer price index, more jobs data, and a consumer sentiment reading next Friday. There will also be earnings reports from JinkoSolar (JKS), Lennar (LEN), and Oracle (ORCL). Investors will be keeping an eye on volatile seasonality, and those reading may want to check out what Senior Vice President of Research Todd Salamone has to say on the matter. Meanwhile, Schaeffer's Senior Quantitative Analyst gives a little insight into what one closely watched sentiment  indicator might mean for stocks in the long run. 

Published on Sep 10, 2021 at 11:49 AM
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