Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Apr 5, 2019 at 9:58 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

Pot stock Aphria Inc (NYSE:APHA) was granted provisional approval in Germany for a cannabis cultivation license, with a minimum annual capacity of 200 kilograms. This comes a few days after Aphria launched its first CBD-based product in Germany. The news has Aphria stock up 1% to trade at $10.03 this morning. 

Since February, Aphria stock has traded in a tight range, churning between the $10.50 and $9 levels. Year-to-date, APHA boasts a 77.5% lead, and going back even further, has now nearly tripled off its Dec. 6 low of $3.75. 

A short squeeze could be fueling the security's climb. Short interest fell 2% in the two most recent reporting periods to 17.37 million shares. However, this still represents a healthy 7.5% of APHA's total available float, and four times the average daily trading volume.

In the options pits, long calls have been popular. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 4,592 calls in the last 10 sessions, compared to 585 puts. Plus, call open interest of 68,294 sits in the 96th percentile of its annual range.

Drilling down, the July 10 strike is home to peak call open interest of 6,759 contracts. Data from the major options exchanges confirms significant buy-to-open activity here, meaning call buyers expect APHA to extend is run above $10 into July.

Published on Apr 5, 2019 at 11:32 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

The shares of workwear concern Duluth Holdings Inc (NASDAQ:DLTH) are sinking today after an abysmal fourth-quarter earning report. The company blamed the results that fell short of analysts' expectations on softening shipping and handling revenue, along with growing freight costs. The apparel name also lowered its 2019 full-year guidance. In response the equity is down 18.2% at $19.26. 

The plummet has DLTH stock down 24% year-to-date, at a level not seen since mid-June. The stock had been attempting to rebound off its late-January lows, and while an area of support briefly emerged at the $22 level, continual downward pressure from its 80-day moving average acted as a ceiling.

Analysts are already chiming in with a round of price-target cuts. Stifel just slashed its price target to $21 from $25, and D.A. Davidson to $19 from $24. DLTH only holds one "strong buy" rating compared to four tepid "holds."

Short sellers are likely cheering today. Short interest rose 19.3% in the last two reporting periods and now accounts for 24.2% of the stock's available float, or about a month's worth of buying power, at the security's average daily trading volume. 

Published on Apr 5, 2019 at 11:06 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Boston Beer Company Inc (NYSE:SAM) is reeling this morning, last seen down 3.9% at $272.79, after Goldman Sachs slammed the beer stock with a downgrade to "sell" from "neutral," and a price-target cut to $245 to $270. The firm said its sees increasing competition negatively impacting sales growth for SAM, and prefers rival Constellation Brands (STZ), which posted an impressive earnings beat after yesterday's close. 

Today's downgrade is far from a surprise for Boston Beer stock. Coming into today, six of the seven covering firms sported "hold" or "strong sell" ratings. Plus, SAM's average 12-month target price of $278.58 is relatively underwhelming, as it comes in flat with current trading levels.     

Digging deeper, the equity's Schaeffer's put/call open interest ratio (SOIR) of 2.03 ranks in the 95th annual percentile. This suggests that near-term options traders are more put-biased than usual right now, with peak open interest currently found at the out-of-the-money April 300 put.

On the charts, SAM entered 2019 trading near $240, and eventually topped out at north of $320 in mid-March. Boston Beer stock has been pulling back since, and breached short-term support at its 200-day moving average earlier this week. Today's drop has the equity testing the $270 region, home to its 80-day moving average and a its late-February pre-bull gap levels.

 

Published on Apr 5, 2019 at 11:07 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis

Twilio Inc (NYSE:TWLO) stock has been in an impressive long-term uptrend, more than tripling in value on a year-over-year basis. More recently, the cloud shares hit a record high of $136 on March 21 before easing back to a historically bullish trendline, last seen up 0.7% at $123.20.

Specifically, TWLO closed Thursday's session within one standard deviation of its 40-day moving average. There have been seven other times the stock has pulled back to support at this moving average after a lengthy stretch above it, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, and one month later, Twilio was up an average 6.8%, with 86% of those post-signal returns positive.

twlo stock price chart on april 5

Based on last night's close at $122.37, another move of this magnitude would put TWLO stock back near $131 -- and above its 20-day moving average, which has helped support the shares for much of 2019. Short sellers have already been hit by the stock's technical strength, and another push higher could encourage some of the weaker bearish hands to jump ship.

By the numbers, short interest on Twilio jumped 18.8% in the most recent reporting period to 8.56 million shares. This represents a healthy 11.4% of the security's available float, or 2.1 times its average daily pace of trading.

Those looking to bet on more short-term upside for TWLO may want to consider an options buying strategy, which creates a lower cost of entry and more leverage than buying a stock outright. The equity's Schaeffer's Volatility Index (SVI) of 54% ranks in the 18th annual percentile, indicating near-term options are pricing in relatively low volatility expectations at the moment.

Plus, Twilio's Schaeffer's Volatility Scorecard (SVS) is perched at a lofty 76 out of a possible 100. This means the security has tended to make outsized moves on the charts over the past year, relative to what the options market was expecting.

Published on Apr 4, 2019 at 12:30 PM
Updated on Mar 19, 2021 at 7:15 AM
  • The Week Ahead

Mostly subdued on the earnings front, the second week in April will host quarterly reports from big bank Wells Fargo (WFC) and blue-chip giant JPMorgan & Chase (JPM). Also sure to capture headlines will be the House of Representatives Democratic Caucus annual retreat, with Fed Chair Jerome Powell set to make an appearance, and traders will also dissect the Fed's latest meeting minutes. In addition, Wall Street will keep one eye trained on Britain, with the U.K.'s Brexit deadline currently April 12, though Prime Minister Theresa May is seeking another extension.

Below is a brief list of some key market events scheduled for the upcoming week. All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

On the economic front, Monday, April 8, will bring data on factory orders. The day is quiet for earnings, with no notable names set to report.

For Tuesday, April 9, the NFIB small business optimism index and the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) are expected. Meanwhile, another quiet day is slated for earnings.

MBA mortgage applications are due Wednesday, April 10, along with the consumer price index (CPI), weekly crude inventories, and the Treasury budget. However, the Fed will be the primary focus, with the Federal Open Market Committee's (FOMC) latest meeting minutes out, and Fed Chair Jerome Powell set to address the House of Representatives Democratic Caucus three-day annual retreat. Earnings from Bed Bath & Beyond (BBBY) and Delta Air Lines (DAL) are expected.

For Thursday, April 11, the economic calendar picks up with speeches from New York Fed President John Williams and St. Louis Fed President James Bullard. Data on weekly jobless claims, the Fed's balance sheet, and the producer price index (PPI) are anticipated. On deck for earnings are Fastenal (FAST) and Rite Aid (RAD).

Closing out the week on Friday, April 12, will be import and export prices, and the latest consumer sentiment data. As it stands currently, April 12 is also the Brexit deadline for the U.K. to leave the European Union (EU). Making earnings headlines will be big banks JPMorgan Chase (JPM), PNC Financial (PNC), and Wells Fargo (WFC).

Published on Apr 4, 2019 at 12:33 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis

Banking giant JPMorgan Chase & Co. (NYSE:JPM) is flat today, trading at $105.39, as Wall Street digests JPM CEO Jamie Dimon's annual letter to shareholders, in which he weighed in on the U.S. education system and higher taxes for wealthy Americans. If history is any guide, though, the Dow stock could find itself in trouble in the near term. 

Taking a look at the charts, JPM stock has been on the rebound since skimming the $98 level late last month, but is now trading near the overhead $107 level, which has provided a stiff ceiling in 2019. Plus, this region is home to the equity's 200-day moving average, and previous tests of resistance here have preceded weak price action in the shares.

Daily Stock Chart JPM

Specifically, there have been two other times in the past three years when the stock has come within one standard deviation of this trendline after a lengthy stretch below it, resulting in an average one-month drop of 10.5%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. A similar fall would drag JPM stock down to the $96 neighborhood for the first time since early January.

Options bulls have been betting on JPM ahead of the big bank's earnings report, slated for release ahead of the open next Friday, April 12. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 3.83. This ratio ranks 2 percentage points from an annual high, which means calls have been bought to open over puts at a much faster-than-usual rate during the past two weeks of trading.

It's a similar trend today, with roughly 32,000 calls and 11,000 puts on the tape -- a slight uptick to what's typically seen at this point in the session. The weekly 4/5 106-strike call is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $0.21, making breakeven for the call buyers at this Friday's close $106.21 (strike plus premium paid).

Published on Apr 4, 2019 at 12:49 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Indexes and ETFs
  • Editor's Pick
  • Quantitative Analysis

Not too long ago, we noted the Dow Jones Industrial Average's (DJI) golden cross -- when its 50-day moving average moved back above its 200-day moving average, often seen as a bullish technical indicator. Since then, its fellow stock market indexes, the S&P 500 Index (SPX) and Nasdaq Composite (IXIC), have made golden crosses of their own. It's the first time all three benchmarks have made golden crosses within a 30-day span since May 2016. Here's what that could mean for the Dow, SPX, and Nasdaq for the rest of 2019 and beyond, if history is any indicator.

Unlike the Dow, after a lone golden cross, the S&P has averaged healthier-than-usual returns looking one, three, six, and 12 months out, per data from Schaeffer's Senior Quantitative Analyst Rocky White. For instance, the index has averaged a three-month gain of 4.07% after a golden cross, and was higher more than three-quarters of the time. That's compared to an average anytime three-month return of 2.12% since 1950, with a positive rate of just 65.9%.

SPX after golden cross vs anytime

It's a similar situation with the Nasdaq. Three months after a lone golden cross, the index averaged a gain of 5.55%, and was higher 79.3% of the time. That's compared to an average anytime six-month gain of 2.85%, with a positive rate of 64.4%, looking at data since 1971.

nasdaq after golden cross vs anytime

However, those returns are even better when the three big stock market barometers make golden crosses around the same time. There have been just 12 times since 1972 when all three indexes made a golden cross within one month, the last occurring in May 2016. For context, there have been 20 Dow golden crosses since 2000, 20 S&P golden crosses since 1979, and 20 Nasdaq golden crosses since 1987.

As we discussed in the aforementioned blog on Dow golden crosses, the blue-chip index has averaged a one-month loss after a lone golden cross, compared to an average anytime gain, looking at data since 1950. However, when the DJI, SPX, and IXIC make golden crosses within a 30-day span, the Dow averaged a one-month gain of 2.39%, and was higher 75% of the time. That outperformance continues looking 12 months out, when the Dow was up an average of 15.79% and higher 91.7% of the time.

dow after simulatneous golden cross

The same can be said for the S&P. A month after the trio made golden crosses, the SPX was up 2.69%, on average -- more than double its average gain after a lone cross, and nearly quadruple its anytime returns since 1972. One year after simultaneous crosses, the SPX was up 14.09%, on average, and higher 91.7% of the time -- also way better than after an individual cross and anytime.

spx after simultaneous golden crosses

Likewise, the Nasdaq shines when it makes a golden cross with its index peers. A month later, the tech-rich IXIC was up more than 5%, on average, and higher 75% of the time. That's almost double its average one-month gain after a lone golden cross. A year later, the Nasdaq was up a whopping 26.1%, on average, and in the black 91.7% of the time. That's compared to an average one-year gain of 16.75% after individual golden crosses, and 12% anytime.

nasdaq after simultaneous golden crosses

In conclusion, when the Dow, S&P 500, and Nasdaq all make golden crosses within 30 days of one another, the indexes tend to enjoy stronger-than-usual returns, likely as a reflection of continued broad-market strength. However, a risk to the bull case is the positioning of wrong-way Cboe Volatility Index (VIX) futures players, who are nearing an extreme in the short volatility trade, per Schaeffer's Senior V.P. of Research Todd Salamone. "Unfortunately, the timing of this vulnerability -- a VIX spike coincident with a market pullback -- is uncertain," he said, as the short volatility trade was in place for several months before the VIX exploded in 2017, but was popular for just a couple months ahead of the fourth-quarter 2018 sell-off.

Published on Apr 4, 2019 at 1:17 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

Nio Inc (NYSE:NIO) stock bottomed at a record low of $4.90 in late March, but has since come off this level. Citigroup thinks the worst is over for the electric auto stock, with analyst Jeff Chung upgrading the shares to "buy" from "hold." And while he cut his NIO price target to $6.80 from $7.20, this still is a 28% premium to last night's close.

BofA-Merrill Lynch also chimed in on Nio stock, lifting its rating to "neutral" from "underperform." Ming Hsun Lee -- a top-rated NIO analyst, according to Refinitiv data -- cited expectations for growing sales in the second quarter following the launch of the company's six-seater ES8.

Nevertheless, NIO shares are down 0.3% at $5.29, feeling the heat as rival Tesla (TSLA) sells off on weak first-quarter deliveries. Options bears are making a rare appearance, too. Specifically, the January 2020 4-strike put is most active today, with almost 11,000 contracts traded. The bulk of these put options have been bought to open, meaning traders are targeting new lows by early next year.

More broadly, it's been call buyers that have been targeting Nio stock amid its bounce from all-time lows. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 84,060 calls over the last 10 days, compared to 10,339 puts.

The bulk of this action has centered at the weekly 4/5 6-strike and April 6 calls, where data from the major options exchanges confirms significant buy-to-open activity. In this case, call buyers expect NIO shares to break out above $6 by the respective expiration dates of tomorrow, April 5, and Thursday, April 18.

Given how heavily shorted NIO stock is, it's possible some of the activity at these out-of-the-money strikes could be a result of shorts initiating an options hedge against any additional upside risk. Short interest on Nio rose nearly 31% in the two most recent reporting periods to 67.6 million shares, representing more than two-fifths of the equity's available float.

 nio stock daily price chart april 4

Published on Apr 4, 2019 at 1:43 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

The shares of PG&E Corporation (NYSE:PCG) are up 2.8% to trade at $19.03 today, after the utility company appointed William Johnson as its new CEO. PCG also said it's reshuffling its board, adding 10 new directors, while seven current board members will step down. In the wake of the news, options traders have taken renewed interest in the beleaguered stock.

More specifically, over 17,000 PCG options have changed hands today -- a modest uptick to the expected intraday amount. The April 20 call is most active, but there's also interesting activity at the weekly 4/5 20-strike call, where it appears new positions are being sold. If this is the case, call writers are banking on the $20 level to serve as a short-term ceiling through expiration at the close tomorrow, April 5.

More broadly speaking, long calls have been popular. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 23,137 calls in the last 10 sessions, compared to 5,669 puts. Considering how short interest increased by 24% in the two most recent reporting periods, its possible some of this call buying could be shorts seeking an options hedge.

PG&E stock has spent most of 2019 churning below that round $20 level -- home to an early January bear gap. In the past six months, the shares have shed 59%, mostly in reaction to the deadly California wildfires in 2018. However, some analysts are starting to warm to PCG, with the stock found at the top of Goldman Sachs' upside list earlier this week. The brokerage firm also expects the security to double over the next 12 months. There's still a ways to go though, with 11 out of 14 brokerages rating PCG a "hold" or "strong sell."

Daily Stock Chart PCG

Published on Apr 4, 2019 at 2:05 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Best and Worst Stocks

Cannabis concern Canopy Growth Corp (NYSE:CGC) got off to a hot start in 2019, and is now up 61.1% year-to-date. The equity has taken a breather after bounding up the charts earlier this year, with support at the $42 level serving as a recent floor. While the stock is inching lower today, a historically bullish signal just flashed on the charts which could mean even more upside for CGC. 

Specifically, the equity just came within one standard deviation of its 160-day moving average. According to data from Schaeffer's Quantitative Analyst Rocky White, the equity has run into this trendline three other times in the past three years. The equity was higher one week later 67% of the time, averaging a whopping 19.3% gain. From where the stock currently sits at $42.96, a similar move would have it trading atop the $51 level -- home to its mid-October record highs. 

CGC Chart Apr 4

While the majority of analysts have a positive outlook on Canopy, there's still room for upgrades, should the security continue north. Currently, CGC holds five "buy" or better ratings, and three "holds."

Despite the analyst optimism, short sellers are still swarming. Short interest rose 9.5% in the last two reporting periods. The 23.3 million shorted shares now represent a healthy 11.4% of the stock's available float, and would take three days to cover at CGC's average daily pace of trading. A potential short squeeze could add additional tailwinds, if these traders start jumping off the bearish bandwagon. 

Published on Apr 4, 2019 at 2:34 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

Oilfield services stock RPC, Inc. (NYSE:RES) is trading up 5.9% today at $12.35, thanks to an upgrade to "overweight" from "underweight" at Morgan Stanley. The brokerage firm also lifted its price target to $15 from $11, territory not seen since early November. The bull note is a rarity for RES shares, which right now have just two positive ratings among the analyst crowd, compared to 15 "holds" or worse.

Also uncommon is the options activity seen in today's trading. While volume clearly remains light on an absolute basis, calls are crossing at more than twice the daily average already, and most popular by far is the May 13 call. Data suggests buy-to-open activity is taking place here, meaning these options bulls are expecting RPC stock to topple $13 in the weeks ahead.

This trading action is noteworthy because the stock topped out right near $13 earlier, and this level acted as a floor for months in 2018, along with it being the site of an early December bear gap. On top of all this, the 200-day moving average sits right at this price point, as well. This trendline hasn't been topped on a closing basis in over a year.

res stock price

Published on Apr 4, 2019 at 3:04 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

The U.S. stock market is mostly higher today on optimism surrounding U.S.-China trade talks. Among individual stocks making notable moves are streaming specialist Roku Inc (NASDAQ:ROKU), U.K.-based software firm Micro Focus International PLC (NYSE:MFGP), and home furnishings retailer At Home Group Inc (NYSE:HOME). Here's a quick roundup of what's moving the shares of ROKU, MFGP, and HOME.

Roku Options Traders Target Bigger Losses

Guggenheim downgraded Roku to "neutral" from "buy," and cut its price target to $72 from $77, saying Apple's (AAPL) streaming service creates a new risk to the company's active user base. In reaction, ROKU stock is down 6.6% at $64.10. The equity earlier found a floor near $62, a familiar floor since a late-February bull gap that is currently home to its rising 40-day moving average.

Several options traders appear to be positioning for more losses through week's end. Amid accelerated activity -- the 137,000 options traded so far is more than double the average intraday amount -- buy-to-open activity has been detected at the weekly 4/5 60-strike put. If this is the case, put buyers expect ROKU stock to settle below the $60 at the close tomorrow, April 5.

Downgraded Micro Focus Stock Finds Familiar Support

Micro Focus stock is spiraling today, down 7.8% at $24.94. This comes after Citigroup downgraded the shares to "sell" from "neutral," saying MFGP had "run ahead of fundamentals." Despite being on track for their worst day since Oct. 24, the shares are finding a foothold in the $24.75-$25.00 region, which corresponds to their late-February highs.

A number of short sellers are likely kicking rocks amid the stock's slide. Short interest fell 28.4% in the most recent reporting period to 1.09 million shares, representing a slim 0.3% of the equity's available float.

At Home Options Bulls Have Kept the Faith

The shares of At Home are trading up 7.6% at $20.44, after Reuters reported the company is exploring strategic options, including a potential sale. The retail stock is struggling to close a bear gap from late March, which was sparked by the company's fourth-quarter profit miss and weak guidance.

HOME shares have now shed 29% in the past six months amid pressure from their 80-day and 120-day moving averages, but options traders have kept the faith. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 14.67 ranks in the 95th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

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