Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on May 3, 2021 at 3:14 PM
  • Earnings Preview

USFD Just Hit a Fresh Annual High, Now What?

by Schaeffer's Digital Content Team
Published on May 3, 2021 at 2:50 PM
  • Most Active Options Update
Published on May 3, 2021 at 1:08 PM

The shares of STMicroelectronics NV (NYSE:STM) are off 0.8% at $36.96, extending Friday's negative price action, headed for its lowest close since March with pressure forming at the $37 level, which is home to STM's year-to-date breakeven level. The firm just came off a first-quarter earnings and revenue beat, which initially drove STM to a two-month peak of $40.59. While the stock has plummeted since that peak, it looks like a historically bullish trendline could be keeping this pullback in check, and could launch STM higher up the charts this month. 

STM Chart May 3 

The trendline in question is STM's 160-day moving average. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, STM has come within one standard deviation of the trendline four other times in the past three years. One month after 67% of these signals, STM was higher, averaging a 5.4% return. A similar move from its current perch would put the stock just below the $40 level. 

STM still sports a solid 50% year-over-year return, a fact that could inspire more members of the brokerage bunch to turn bullish on the equity. Currently, five covering the chip stock call it a "buy" or better, while three say "hold" or worse. Meanwhile, the 12-month consensus price target of $45.11 is a 21.8% premium to today's levels. 

The firm's recent earnings were met with a bullish reaction from the options crowd, however. In the last two weeks 15,000 calls exchanged hands, compared to just 6,179 puts. Most popular during this time period was the May 45 call, where positions were being opened. This means these traders are speculating on a lot more upside for the underlying stock by the time these contracts expire later this month. 

Published on May 3, 2021 at 12:20 PM
  • Earnings Preview

Allstate Stock Surges to Fresh Pre-Earnings Peak

by Schaeffer's Digital Content Team
Published on May 3, 2021 at 12:18 PM
Updated on May 3, 2021 at 12:20 PM
  • Ezines
  • Midday Market Check
Published on May 3, 2021 at 11:15 AM
  • Analyst Update


Published on May 3, 2021 at 10:54 AM
  • Analyst Update

Cowen and Company handed out a bull note to Draftkings Inc (NASDAQ:DKNG) this morning, lifting its rating on the sports betting concern to "outperform" from "market perform." The analyst cited the growing number of states legalizing sports betting and predicted a "robust" path for DKNG in H2 all the way through 2022. Cowen and Company also added that DKNG's recent pullback from its all-time highs near the $74 level -- notched late in the first quarter of 2021 -- presents a good risk/reward opportunity. The analyst maintained its $70 price target. 

The equity is up 1% at $57.21 this morning in response, taking another stab at overtaking the 100-day moving average, which has kept a lid on the shares during the past several sessions. Higher up, DKNG will have to contend with its 50-day moving average, a formerly supportive trendline that snuffed out its late-April rally. The $56 level looks to have emerged as support on the charts, though, and year-over-year DKNG still boasts a 186.9% lead. 

Cowen and Company is joining a mostly bullish brokerage bunch. Coming into today, 18 analysts called DKNG a "buy" or better, compared to eight "hold" or worse ratings. Plus, the 12-month consensus price target of $73.50 is a 28% premium to current levels. 

Short interest is still on the rise, with volume sitting at just shy of record levels. An unwinding of some of these bearish bets could put more wind at DKNG's back, especially considering the 24.78 million shares sold short make up a solid 7.3% of the stock's available float. 

Published on May 3, 2021 at 10:39 AM
  • Analyst Update
Published on May 3, 2021 at 10:37 AM
  • Buzz Stocks



Published on May 3, 2021 at 9:32 AM
  • Monday Morning Outlook


Last Wednesday, all eyes were on the Federal Reserve and Chairman Jerome Powell, as the Federal Open Market Committee (FOMC) met. For those that think the Fed has had a heavy hand in supporting the economy and the stock market, these once-every-six-weeks events are important, as any surprise change in policy could have a major impact on the equity market.

On Wednesday, there were not any surprises on the monetary front and that was evident in the behavior of the S&P 500 Index (SPX -- 4,181.17), which closed within three points of its previous day’s close and less than two points away from its morning open.

From a technical perspective, the SPX’s price action on FOMC day and the previous two days caught my eye, which I posted about on Twitter per above. Specifically, after the Fed meeting, the SPX completed a third successive day in which the open and close were roughly the same. I referred to them as “doji-like,” as the open and closes were not exactly the same, but close enough that it was easily observed.

My immediate reaction was to see if three consecutive doji candles as described occurred recently. Sure enough, I spotted similar patterns in late-January and mid-February, both of which preceded short-term pullbacks within a couple of trading days.

A visual of the three-day pattern -- known as a “Tri-Star” -- is depicted in the daily SPX chart below. The circled areas are the tri star candlestick patterns.  Investopedia does a nice job of describing and interpreting the pattern here.

Within this link, you will find these words:

A single doji candlestick is an infrequent occurrence that is used by traders to suggest market indecision. Having a series of three consecutive doji candles is extremely rare, but when discovered, the severe market indecision usually leads to a sharp reversal of the given trend

The above description and implications are exactly what occurred in January and February. It remains to be seen if last week’s reversal pattern precedes an immediate decline like we witnessed in January and February. 

SPX Doji Candle

Friday’s action could be the start of something bigger, but bears beware that Friday’s low occurred just above the top trendline of a channel in place since mid-November, when positive headlines on a Covid-19 vaccine emerged. The top of this channel line is the first level of short-term support, which is at 4,174 today and 4,194 at week’s end.

A move into the channel suggests loss of momentum since last month’s breakout and risk of a further pullback to a second line of defense at 4,131, which is exactly 10% above the 2020 close.  A third potential support level is 4,100, which is the level at which the breakout above the top of the channel occurred on April 9.

If Friday is indeed the beginning of a selloff, the most important area of support is between 4,020 and 4,060. The 4,020 level will be the approximate site of the rising 50-day moving average at week’s end.

As discussed last week, with retail traders playing a major part in the stock market’s advance, this popular moving average could be key in determining whether such investors continue to buy or run for the hills if they see a break below it.

The 4,060 level is key this week from two perspectives:

  1. At week’s end, it becomes the site of the bottom of the channel in place since November, and:
  2. It's in the vicinity of 4,057, which is six times the 2009 closing low that marked an end to a bear market. Two times, three times, four times, and five times this closing low have marked major peaks or long hesitation areas since that bear market bottom. But so far, six times this low has yet to pose a major problem for bulls. This does not mean that bulls are in the clear, as a move above five times the 2009 low early last year proved only temporary before the pandemic-driven selloff occurred.

“…during instances where you see sentiment-based risk heightened, consider hedging or ensure that you have a plan for taking such action when the charts suggest doing so. If the charts continue to look strong, as they do now, it is best to stay the bullish course, with a plan in place to hedge when technical-based risks increase due to higher levels of support breaking down.”

          -Monday Morning Outlook, April 26, 2021

Just as the candlestick pattern discussed above hints at a pullback, various sentiment indicators that we track are showing optimistic extremes that make the market vulnerable to selling. Plus, option activity on CBOE Market Volatility Index (VIX—18.51) futures continues to hint at a pullback.

For example, the 10-day, equity-only, buy (to open) put/call volume ratio is at 0.32. A reading of 0.31 preceded the pullback that began in mid-February. And according to the weekly National Association of Active Investment Managers (NAAIM) survey, the average portfolio exposure was 103.72, with 100.0 considered fully invested and 200.0 being leveraged long. The last time a reading came in above 100.0 was mid-February. The current reading implies that this group is not a huge potential source of buying power like they were coming into April, when the reading was 52.02, or only about half invested.

Additionally, market participants continue to buy VIX calls at a high pace relative to puts. As I mentioned a few weeks ago and as depicted in the graph below, such behavior in the past has preceded volatility pops as measured by the VIX. In fact, the 20-day VIX buy (to open) call/put volume ratio recently hit the highest level since the end of May 2020, which preceded a VIX pop two weeks later. These VIX pops are coincident with equity market declines as the demand for portfolio insurance increases when the market begins turning south.

Perhaps bulls can take some comfort that this ratio is not at 5.0, which preceded the huge pandemic-driven selloff in February 2020 that saw the VIX shoot up above an 80 reading.

Per my comments last week, this suggests having an action plan for hedging long positions if support levels begin to break down. As of Friday, this has not yet occurred.  But gaps below support are a risk as well, and with the bearish candlestick pattern that emerged last week, this may be the signal for some of you to implement a hedge or take some other action to guard against a selloff before it is too late.

VIX pc ratio

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

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Published on May 3, 2021 at 9:21 AM
  • Opening View

'Sell in May and Go Away' is getting a late start to 2021. Stock futures are pointed confidently higher to kick off May, fresh off the major benchmarks securing solid monthly wins last Friday. Futures on the Dow Jones Industrial Average (DJI) are eyeing a 210-point burst, while S&P 500 Index (SPX) and Nasdaq-100 Index (NDX) are firmly in the black as well. In other news, business mogul Warren Buffet said Vice Chairman Greg Abel is set to replace him when he is no longer in charge of Berkshire Hathaway (BRK).

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

  • 10 pot stocks that smoked the last week of April.
  • Can Hyatt Hotels stock thrive after the pandemic?
  • Plus, lofty upgrade for DKNG; unpacking Moderna's latest deal; and Tilray completes merger.

OV Chart 0503

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.4 million call contracts traded on Friday, and 842,568 put contracts. The single-session equity put/call ratio rose to 0.59 and the 21-day moving average stayed at 0.46.
  2. DraftKings Inc (NASDAQ:DKNG) is up 1.4% before the bell, after the company earned an upgrade from Cowen to "outperform" from "market perform." The analyst in question noted the gambling industry's path to legalization, as well as the stock's potential for growth and market share increases.
  3. Pharmaceutical name Moderna Inc (NASDAQ:MRNA) is up 3.6% ahead of the open. The company recently reached a deal with a program backed by the United Nations to supply 500 million dosed of its Covid-19 vaccine to countries with lower income levels.
  4. The shares of Tilray Inc (NASDAQ:TLRY) were last seen up 2.3% in electronic trading, after reports that the cannabis concern completed a high-profile merger with Aphria (APHA). TLRY is up 122% in 2021.
  5. There will be no shortage of economic indicators today, as investors look ahead to the final Markit manufacturing purchasing managers' index (PMI), as well as the ISM manufacturing index. Plus, construction data and motor vehicles sales (SAAR) are set to come out.


European Markets Rise Amid Upbeat Economic Data

Most markets in Asia were closed today for holiday, with the exception of Hong Kong's Hang Seng and the South Korean Kospi, which dropped 1.3% and 0.7%, respectively. India's surge in Covid-19 cases is putting pressure on the stocks, as the country posted a daily record rise in cases on Saturday.

In Europe, shares are higher midday. The German DAX is up 0.8% at last check, amid data that the country's retail sales for March came in at a pandemic high year-over-year. Elsewhere, the French CAC 40 is up 0.6%, while London's FTSE 100 is closed for a bank holiday.

Published on May 3, 2021 at 8:45 AM
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