Banking giant Charles Schwab Corporation (NYSE:SCHW) recently announced plans to move its headquarters from the tech epicenter of Silicon Valley in San Francisco, California to Westlake, Texas. Moving away from California is a fad that's becoming more and more prominent as the work-from-home environment forces companies to seek a base with lower taxes and less costly labor. And for Schwab, its just another in a flurry of moves lately; in October 2020, they announced a $22 billion acquisition of its former competitor, TD Ameritrade (AMTD).

Charles Schwab stock is currently up 9% in 2020, but has tacked on 43.4% this quarter alone thanks to a post-earnings pop of 5.1% back on Oct. 10, and the aforementioned AMTD news. During this torrid run, the shares' ascending 20-day moving average has kept pullbacks in check.

It's an attractive time to buy premium on SCHW, too, per the stock's Schaeffer's Volatility Index (SVI) of 34% -- in the 9th annual percentile, meaning short-term options are pricing in lower-than-usual volatility expectations.

Charles Schwab (SCHW) stock has a forward dividend of $0.72 along with a forward dividend yield of 1.39%. The company last paid a dividend of $0.18. SCHW has paid dividends to investors since 1990. Charles Schwab has a great balance sheet with $57.56 billion in cash and only $9.27 billion in total debt. In addition, the company grew its annual revenue and net income at an impressive rate between 2016 and 2019. Charles Schwab added over $3 billion in revenue and nearly $2 billion in net income during that timeframe. 

Charles Schwab has seen a top and bottom line decrease in 2020, but has still maintained solid figures. The company’s acquisition of TD Ameritrade should boost  revenue and net income at an even faster pace than before, making Schwab stock's price-to-earnings ratio of 24.08 more appealing than it would appear at first glance. Although the merger will take some time (up to 36 months, according to Charles Schwab press releases) to produce significant results, SCHW has the potential to be a sound long-term investment.

“… many sentiment indicators we track are displaying levels of optimism that have historically made stocks vulnerable to pullbacks. Or, at best, vulnerable to a period of underperformance.…if you are looking for an area that the SPX might have to move below before risk grows of an unwind of the growing enthusiasm we are seeing at present, I think the 3,550-3,580 area is a good starting point…Do not disturb long positions, as the trend is your friend and market enthusiasts have been given no reason to panic. But with the CBOE Market Volatility Index (VIX -- 20.79) at four-month lows, you could hedge long positions in recognition of the sentiment-based risk.”

- Monday Morning Outlook, Dec. 7, 2020   

The excerpt I led with last week is again my lead, as I think this best describes not only the sentiment backdrop, but what it might take from a technical perspective to generate an unwinding of the growing optimism on display among investors and short-term traders. 

As stocks have grinded somewhat higher during the past two weeks, optimism has also increased. The positive sentiment has not only been documented here, but on social platforms and other media outlets. Sentiment-based measures, such as the equity-only, buy (to open) put/call ratio, are at extremes that suggest the market is more vulnerable than usual to negative headlines, while positive headlines are less apt to produce the sharp rallies consistent in a low-expectation environment. 

Even though stocks have edged higher during the past couple of weeks, so too have volatility expectations, as measured by the CBOE Market Volatility Index (VIX – 21.57). In other words, hedging costs are only slightly higher than two weeks ago, thanks to a steep retreat from a reading of 23.61 in the last 30 minutes of trading on Friday.

That said, the VIX remains above the 20 area and the half-high of its October closing peak of 40.28, even as the SPX carved out a new all-time closing high last week. Why might the VIX be stubbornly holding above its 20 area amid this rally and its 30-day historical volatility at 11.50? One reason could be the important run-off election in Georgia that is in two weeks, which could potentially shift the make-up of the currently Republican-controlled Senate.

Certainly, the extremes in bullishness among traders and investors should be on your radar. In fact, per the chart below, our 10-day, equity-only, buy (to open) put/call volume ratio, which we calculate using data from three options exchanges, just touched the level of the Aug. 31 - Sept. 2 period, which was then a multi-year low before the ratio headed higher. The multi-year low reading preceded a three-week pullback of more than eight percent in the S&P 500 Index (SPX – 3,709.41). 

“The U.K. has been plunged into chaos after the government revealed a new strain of the coronavirus is "out of control." Authorities effectively locked down the southeast of the country including London, restricting travel into and out of the region. Most European countries have banned flights and ships to Great Britain. Given freight travel bans, there is a risk of delays to essential food supplies in the days before Christmas. A WHO official said it could take more than a week to find out how the new strain responds to vaccines.” 

          - Bloomberg, Dec. 21, 2020

“Dr. Scott Gottlieb says there is no evidence that new UK strain of COVID-19 will evade vaccines, but it is possible vaccines will need to be updated in future years; good news is MRNA vaccines can be updated very easily”

          - Briefing, Dec. 21, 2020

As it stands now, this ratio has not yet turned higher, nor have equities retreated to the extent that would spark an unwind of the optimism on display. However, amid the news related to a new virus strain, S&P futures are indicated about two percent lower, which could be the catalyst that unravels the optimism, especially if the technical levels I have referenced these past weeks are broken to the downside.

We are also seeing optimism among active investment managers, as shown in the weekly National Association of Active Investment Managers (NAAIM) exposure survey.  In fact, the four-week moving average of weekly exposure readings has moved above 100, which means these managers are fully invested with a tiny bit of leverage. Per the chart below, this is an extreme reading when looking back five years. But one would have to see evidence of this group reducing exposure as technical support levels break down on key equity benchmarks before acting on this optimism. If this group remains bullish amid a continued flow of positive headlines, an unwind of this growing enthusiasm could be delayed. The latest positive for stock market participants was the Fed announcing that it continues to expect interest rates to remain low for the next couple of years as they continue to buy Treasury bonds.

The latest positive for stock market participants was the Fed announcing that it continues to expect interest rates to remain low for the next couple of years as they buy Treasury bonds and hint that another stimulus is on the way. But will this be enough to overcome the latest uncertainties with respect to a new strain of the virus?

I do find it interesting that extremes in optimism are flashing as multiple equity benchmarks and exchange-traded funds (ETF’s) are trading around psychological round numbers. 

For example, the Dow Jones Industrial Average (DJI -- 30,179.05) hit 30,000 on November 24. While it is above this level, it has been mostly sideways action since late November. Similarly, the S&P 500 Index has been going sideways since early December, after first touching the 3,700-century mark.

The recently outperforming Russell 2000 (RUT – 1,969.98), which I highlighted last week as having much more short-covering potential among its components relative to SPX components, is making a charge at the 2,000-millennium level for the first time ever. With 1,982 representing double its March closing low and 2,001 the site of its round 20-percent year-to-date gain, this index is susceptible to a huge speed bump as profit taking creates potential resistance.

So how do you play this environment? Strong momentum higher on the heels of positive vaccine news and a friendly Fed, but new uncertainties with respect to whether the recently approved vaccines for Covid-19 will fight the new strain? 

First, options can be used in lieu of stocks to reduce dollars at risk but allow leverage to work for you in the event you are playing stocks to the upside that might rally on this morning’s headlines, such as the Teladoc (TDOC) or Zoom Video (ZM). 

You may also find straddles or strangles as a worthwhile strategy, which involves the simultaneous purchase of a call and put option on the same underlying method. The put gives you insurance in recognition of the sentiment-based risk and new uncertainty with the virus, while the call gives you exposure to the momentum higher with minimal drawdown that has (so far) transpired since the elections and vaccine news.

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

Continue reading:

• The Week Ahead: Wall Street to Slow Down Next Week Ahead of Christmas Holiday
• Indicator of the Week: What to Expect After Landing a Huge IPO Return

Last week ended with all three major indexes closing lower on quadruple witching Friday. The main source of contention was the $900 billion stimulus package that was still pending in Congress, with last-minute disagreements putting a damper on progress. Despite the last day of the week going red, the indexes all scored intraday records earlier in the day, and took away weekly wins.

The Dow Jones Industrial Average (DJI - 30,179.05) dropped 0.4% for the day on Friday, and gained 0.4% last week. The S&P 500 Index (SPX - 3,709.41) dropped 0.4% on Friday, and gained 1.3% last week. The Nasdaq Composite (IXIC -12,755.64) dropped 0.1%, for the day on Friday, but added 2.9% on the week last week. Finally, the Cboe Volatility Index (VIX - 21.57) lost 1.6% on Friday, and shed 7.5% for the week for its fourth consecutive weekly loss.

The stock market will be relatively quiet in the days leading up to Christmas this week, though there will still be a handful of economic indicators for investors to evaluate as we take on the second-to-last week of the year. The holiday-shortened week will feature core durable goods, personal income, core inflation, and new and existing home sales data -- all due before the market closes early on Thursday. In addition, traders can expect the weekly jobless claims update, as well as the consumer confidence and sentiment indexes.

Today, the week kicks off with Chicago Fed national activity data on tap. We will also hear from FactSet, Calavo Growers, and HEICO on the earnings front.

For your convenience, we have rounded up the companies slated to release earnings today, December 21:

FactSet Research Systems, Inc. (NYSE:FDS -- $347.03) provides integrated financial information and analytical applications. FactSet will report its first-quarter earnings of 2021 before the bell today.

Calavo Growers, Inc. (NASDAQ:CVGW -- $72.08) markets and distributes avocados, prepared avocados, and other perishable foods. Calavo Growers will report its fourth-quarter earnings after the market closes today.

HEICO Corporation (NYSE:HEI -- $133.09) designs, manufactures, and sells aerospace, defense, and electronic related products and services. HEICO will report its fourth-quarter earnings after the market closes today.

Here is a quick recap of how Friday's earnings calls played out:

Apogee Enterprises, Inc. (NASDAQ:APOG -- $32.13) designs and develops glass and metal products and services. Earnings per share increased 57.89% year over year to $0.90, which beat the estimate of $0.69. Revenue of $313,583,000 decreased by 7.20% from the same period last year, which missed the estimate of $327,410,000.

Darden Restaurants, Inc. (NYSE:DRI -- $118.62) owns and operates full-service restaurants. Earnings per share were down 33.93% year over year to $0.74, which beat the estimate of $0.71. Revenue of $1,657,000,000 declined by 19.41% year over year, which missed the estimate of $1,680,000,000.

Winnebago, Inc. (NYSE:WGO -- $59.54) manufactures and sells recreation vehicles and marine products. Earnings per share rose 131.51% over the past year to $1.69, which beat the estimate of $0.98. Revenue of $793,131,000 higher by 34.78% year over year, which beat the estimate of $752,500,000.

NIKE, Inc. (NYSE:NKE -- $140.50) designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories. Earnings per share rose 12.9% over the past year to $0.78, which beat the estimate of $0.70. Revenue of $11,200,000,000 higher by 6.16% year over year, which beat the estimate of $10,330,000,000.

Looking ahead to tomorrow, investors will be looking ahead to a gross domestic product (GDP) revision, the latest consumer confidence index, and existing home sales data. CarMax, Neogen, and Cintas are all slated to release their quarterly earnings reports on Tuesday, too.

The U.S. stock market has a shortened schedule this week, with only three and a half trading days. On Thursday, December 24, the stock market hours will be 9:30 a.m. through 1:00 p.m. ET in observance of Christmas Eve. On Friday, December 25, the stock market will be closed in observance of Christmas.

Trading options can be a complicated process as a lot of options strategies are available and traders need to evaluate all of the possible routes ahead of executing a trade. As such, Schaeffer's are starting a new educational series titled Optimizing Your Options Strategies. The beauty of options trading is that there are options strategies for every market environment. In this series, we will cover all available options strategies for an educated trader to consider when identifying trading opportunities.

In this article, we will be talking about one of the most popular options strategies known as Debit Spreads. Utilizing a debit spread options strategy involves the simultaneous buying and selling of options of the same underlying stock with different strike prices, requiring a net outflow of premium. This results in a net debit in the trading account and, thus, the strategy gets the name of a debit spread.

The sum of all the options sold is lower than the sum of all the options purchased, therefore the trader must put money down to set up the trade. The higher the debit spread, the higher the initial cash outflow the trader incurs in using the strategy.

Debit spread options strategies generally involve buying one option and selling another option of the same class (call or put) on the same underlying stock with a different strike price and generally the same expiration date. However, a debit spread can contain three or more options as well, but the overarching concept remains the same. If the income collected from all the options results in a lower monetary value than the cost of all options purchased, the result is a net debit to the account (premium is debited from the trader's account).

The opposite of a debit spreads options strategy is a credit spread options strategy where, instead of debiting premium from a trader's account, the trader receives a net premium in his account upon executing the trade.

The maximum profit realized from a debit spread trade is the difference in strike prices minus the net premium debited from the account, realized when the options are in-the-money (ITM). The maximum loss incurred is limited to the net premium paid upfront from the trader's account when both options expire worthless.

Different Debit Spread Options Strategies for Different Trading Objectives

There is a range of different debit spread strategies that one can use when trading options. The trader decides the optimum strategy to be used based on the current state of the stock, what sort of price movement the trader is anticipating, and what type of options trading strategies the trader is comfortable with. Debit spread options trading strategies can be based on a bullish posture, a bearish posture, or a neutral posture on future stock price action.

Bullish options strategies are traded when the options trader expects the underlying stock price to increase from the current price. It is necessary to assess how high the stock price is anticipated to go in the specific time frame so that traders choose the optimal options trading strategy. Bullish debit option strategies should be generally used for moderate bullish postures. These strategies are used because the maximum profit is capped, but the margin requirement is less considering the nominal exposure.

A bull call spread is a popular example of bullish debit spread options strategies. A bull call spread is when a trader buys a lower strike price call option and subsequently sells a higher strike price call option to pay a net premium debit.

Bearish options strategies are used when the options trader expects the underlying stock price to decrease. It is necessary to assess how low the stock is anticipated to go during a specific time frame, because bearish debit spreads should only be used when the trader has a moderately bearish posture.

A bear put spread is a common example of bearish debit spread option strategies. A bear put spread is used when a trader buys a higher strike price put option and subsequently sells a lower strike price put option to pay a net premium debit.

Neutral options strategies are employed when a trader expects the underlying stock price to not move much from the current market price in the desired time period. it is necessary to assess all possible situations here becaus,e if you wrong, you may start to lose money fast.

A butterfly spread is a popular example of a neutral debit spread options strategy. A long butterfly spread with calls is a three-part strategy that is created by buying one call at a lower strike price, selling two calls with a higher strike price, and buying one call with an even higher strike price. All calls have the same expiration date, and the strike prices are equidistant.

Trading options can be a complicated process as a lot of options strategies are available and traders need to evaluate all of the possible routes ahead of executing a trade. As such, Schaeffer's are starting a new educational series titled Optimizing Your Options Strategies. The beauty of options trading is that there are options strategies for every market environment. In this series, we will cover all available options strategies for an educated trader to consider when identifying trading opportunities.

In this article, we will be talking about one of the most popular options strategies known as Long Calls and Puts. Buying calls and puts is one of the simplest ways to take advantage of the perks of options trading. Buying options allows traders to capitalize on the true power of convexity, leveraging truncated risk. What this means is that, when buying options, a trader's downside risk is capped at his initial investment but his upside potential on each trade is theoretically unlimited.

Before learning the strategy, a trader must understand what an option is. An option is an equity that gives the option buyer the right, but not the obligation, to purchase the underlying stock at a specified price within a specified period of time. One option is representative of, usually, 100 shares of the underlying stock.

A call option buyer profits when the underlying stock price increases in value, while a put option buyer profits when the underlying stock price decreases in value. The option buyer can exercise, or close his option position, at the current market price on or before the expiration of the option.

A long naked option buying strategy, or simply buying either a call or a put, has its own benefit and drawbacks. A naked option purchase has unlimited profit potential because, theoretically, the stock can increase without a cap and options are leveraged off of stocks for exponential returns. However, with option buying, traders can expect a winning rate of just 35-50% with a profitable option buying approach. This is a hard-to-swallow statistic for many considering options trading, but must be understood before a trader attempts the usage of long calls and puts.

The maximum amount of money you can lose when buying a call or a put option is the just the premium you paid for the trade. This means that you can only lose 100% of the money you put in the trade, also known as truncated risk.

If you buy a call option, the breakeven price is your cost per share (premium) plus the strike price of the option. If you buy a put option, the breakeven price is your cost per share (premium) minus the strike price of the option.

The Basics of Buying a Call Option

Buying a call option gives the buyer the right to buy 100 shares of a company on a given date (also known as the option expiration date) at a specific price known as the strike price. If the price of the underlying stock goes up, then it's likely that the price of the call option contract will also go up, and if the price of the underlying stock goes down, then the price of the call option contract is also likely to go down.

If you buy a call option, you can hold the contract till the expiration date, or you can exercise the options contract at anytime you see the opportunity to take profit or limit losses. At this time, the seller would need to sell his shares at the current market price.

While buying call options, you pay the current market price for the right to the options contract which is called the option's premium. If the current price of the underlying stock is higher than the price of the underlying stock, plus the premium you paid for it, then you are in the profit zone for call buying.

The Basics of Buying a Put Option

Buying a put option gives the buyer the right to sell 100 shares of a company on a given date (also known as the option expiration date) at a specific price known as the strike price.

If you buy a put option, you can hold the contract till the expiration date, or you can exercise the options contract at anytime you see the opportunity to take profit or limit losses. At that time, the seller would need to buy back your shares at the current market price.

While buying put options, you pay a market price for the right to the options contract which is called the option's premium. If the current price of the underlying stock is lower than the price of the underlying stock, plus the premium you paid for it, then you are in the profit zone for put buying.

Considering all the factors that we recommend one considers when choosing an options newsletter publisher to partner with, it is now time that we get more specific. At Schaeffer Investment Research, we take pride in our nearly 40 year old history of providing incredible trading profits for our valued clients. Schaeffer's Investment Research was one of first options newsletter publishers ever, founded in 1981. We have since thrived through every kind of stock market environment thrown at us to date. Schaeffer's mission is to provide our subscribers with the best in class research, as well as high profit potential options plays.

We are the nation’s leading options newsletter publisher, delivering cutting-edge market commentary and trade ideas throughout every trading day. Our expert research and quantitative analysis teams work to ensure that our customers are able to capitalize on as many trading opportunities as possible. Backed by stock market news outlets, research from the Schaeffer's team of in-house analysts (including our options guru, Bernie Schaeffer) is regularly featured by The Wall Street Journal, Bloomberg, MarketWatch, USA Today, Reuters, CNBC, US News and World Report, and more.

Schaeffer's journey began in 1981 when Bernie Schaeffer and his partner were working as actuaries for Great American Insurance. After gaining significant experience in options trading, Bernie soon realized that there was a pressing need for an options newsletter for small traders and professional traders alike. This identification of a missing support solution for retail traders resulted in our development of the nation's best options trading newsletters.

In this article, we will provide detail on a couple of our most loved options newsletters, for both the convenience of the trade delivery as well as the long-standing portfolio returns.

Schaeffer’s Option Advisor is our flagship options trading program, clocking in at nearly 40 years old. Option Advisor provides traders with the opportunity to get one step closer to financial freedom with Bernie Schaeffer’s Option Advisor. The options newsletter provides 10 options trade recommendations every month. Each trade comes complete with an in-depth analysis and rationale for recommending the specific trade. In addition to the 10 options trades delivered each month, all members receive access to Bernie's monthly market outlook as well as a timely educational piece. As a bonus for all members, access to Schaeffer's Top Gun Trading Course and Schaeffer's Quick Start Guide is included with membership.

Schaeffer’s Weekend Trader Alert is one of our most popular trading alerts, delivered every Sunday at 7 p.m. ET. Weekend Trader Alert allows traders to step up their financial goals without being active and available during stock market hours. Schaeffer’s Weekend Trader Alert provides subscribers with 1-2 option-buying trade ideas every week. We provide everything you need to know to place the trade on your broker platform in 15 minutes or less.  Backed by our extensive research and in depth analysis, each simple call or put buying recommendation targets around a 100% return on investment. In addition to the profit-seeking trade recommendations you receive each week, all members get complementary access to Schaeffer's Quick Start Guide and Schaeffer's Weekend Trading Handbook. Both of these tools provide traders with everything they need to successfully trade Schaeffer’s Weekend Trader Alert, including our premier money management guidelines.

Schaeffer’s Weekend Player, one of our newest and most loved options trading newsletters, allows traders to turbo-charge their options portfolio growth with even higher profit targets. As one of the top-performing options newsletters, time and time again, our research team works tirelessly to provide you huge returns on our trade recommendations, targeting gains of 200% or more. Schaeffer's Weekend Player provides 1-2 options-buying trade recommendations each week on Sundays at 7 p.m. ET. All trades published in Weekend Player are simple purchases of calls and puts targeting returns of 200% or more on each trade. Membership to Schaeffer's Weekend Player comes with many bonuses. The bonuses include Bernie Schaeffer's Chart of the Week, Schaeffer's Quick Start Guide, and Schaeffer's Weekend Trading Handbook. Using Schaeffer's Weekend Player, and following Schaeffer's money management guidelines, will allow you to target the high-profit winners you crave, without spending hours doing research and constantly watching the live market. Plus, with cheap premiums of just $3 to $8 on average, you access the cheapest and most leveraged opportunities that Bernie can find, every single week.

Trading options can be a complicated process as a lot of options strategies are available and traders need to evaluate all of the possible routes ahead of executing a trade. As such, Schaeffer's are starting a new educational series titled Optimizing Your Options Strategies. The beauty of options trading is that there are options strategies for every market environment. In this series, we will cover all available options strategies for an educated trader to consider when identifying trading opportunities.

In this article, we will be talking about one of the most popular options strategies known as Credit Spreads. Credit spreads are a popular options strategy where, most simply, the trader sells a higher-priced option and buys a lower-priced option of the same stock and same expiry. The strategy uses two options contracts to form a range consisting of a higher strike price and a lower strike price. The trader gets a net credit from the difference between the two premiums from the options.

The buyer of a credit spread option can profits if the credit spread between two specific benchmarks widens or narrows, depending upon the way the option is written. Credit spreads come in the form of both calls and puts, allowing both bullish and bearish approaches to the strategy.

There are various different methods for implementing credit spreads and we will further discuss bullish put spreads and bearish call spreads in this article. Regardless of a traders inclination, all credit spreads are designed to make a profit when spreads between the two options narrows.

The potential profit on a credit spread is limited to the net premium received minus the commissions, and this profit is realized if at expiration both options are out of money and, therefore, both options expire worthless. The goal is for your position to expire worthless.

To find the credit spread breakeven points for bullish credit spreads, the net premium is added to the lower strike price. For bearish credit spreads, the net premium is subtracted from the higher strike price to breakeven. 

Bullish Credit Spread Strategies

Bearish Credit Spread Strategies

The past five days marked a major step in the United States' fight against the pandemic, thanks to the initial rollout of Pfizer's (PFE) and BioNTech (BNTX) COVID-19 vaccine on Monday. Also in focus that day was a new $908 billion stimulus proposal. However, none of those headlines were enough to cheer investors up, as virus cases continued to rise, and the death toll hit a 300,000 record. The Dow fell off its intraday record highs to finish lower, with the possibility of social distancing restrictions weighing on investors' minds. By Tuesday, sentiment had turned optimistic, as lawmakers worked on a stimulus deal, and Senate Majority Leader Mitch McConnell recognized Joe Biden as president-elect following his Electoral College win. Plus, the Food and Drug Administration (FDA) said data showed Moderna's (MRNA) COVID-19 vaccine met emergency use expectations.

Wall Street experienced a volatile trading session on Wednesday, which made up for a mixed bag of stocks. While the S&P 500 and tech-heavy Nasdaq reversed earlier losses to finish higher, the Dow slipped into the red, despite Congress leaders getting closer to a stimulus deal and the Fed's decision to keep interest rates low. The major indexes all nabbed record closes on Thursday, however, brushing off dismal jobless claims data while a consensus on stimulus seemed to be within reach. As of Friday afternoon, the benchmarks were poised for weekly wins, but had fallen from those highs, with federal funding set to lapse on Saturday and a final decision on stimulus yet to be announced.

Major Acquisitions Send Stocks Higher

Major deals happened on Wall Street this week. For one, Electronic Arts (EA) was on pace for a seven-day winning streak after acquiring Codemasters for $1.2 billion on Monday, outbidding rival Take-Two Interactive Software (TTWO). Later on Tuesday, Eli Lilly (LLY) was surging as well, after agreeing to buy Prevail Therapeutics (PRVL) for $1.04 billion, in an effort to expand its presence in the lucrative field of gene therapy. And on Wednesday, Aphria (APHA) and Tilray (TLRY) both moved higher, after the Canadian cannabis companies announced an all-stock merger, and became the world's largest cannabis producer.

Big Tech Stocks in Focus

A handful of tech giants were also in focus this week. Tesla (TSLA) was higher on Monday, brushing off a production shutdown after it was reported the 2020 favorite would join the S&P 500, as well as the S&P 100 at the of the week. Meanwhile, newly listed DoorDash (DASH) plummeted after receiving a downgrade from D.A. Davidson to "neutral" from "buy," as well as a price target hike to $150 from $93. The analyst cited "little room" for performance hiccups, due the security's current valuation. And finally on Thursday, Snowflake (SNOW) moved higher, making it to Senior Quantitative Analyst Rocky White's list of 20 stocks that have attracted the highest weekly options volume. 

Twitter a "Top Pick," Analysts Hit Pause on MRNA

It's probably difficult to quantify, but it felt like there was an inordinate amount of analyst attention doled out this week. Two brokerages pumped the brakes on Moderna (MRNA) despite its upbeat vaccine news. An upgrade sent Nutanix (NTNX) back toward its pre-pandemic levels, while Deere (DE) and Tenet Healthcare (THC) both received lofty price-target hikes.

Elsewhere, J.P. Morgan Securities named social media giant Twitter (TWTR) a top pick, while a bull note sent Chipotle Mexican Grill (CMG) to new record highs.

Wall Street Slows Down Next Week Ahead of Christmas

The market will be relatively quiet in the days leading up to Christmas, with only a few significant names expected to report earnings next week, including the likes of CarMax (KMX), Paychex (PAYX) and Cintas (CTAS). As for economic indicators, traders will be looking ahead to the weekly jobless claims update, as well as housing, personal income, core durable goods and inflation data. In addition, both the consumer confidence and sentiment indexes are on tap. Before then, dive into what this recent period of bullish seasonality could mean for stocks, as well as what to expect out of a big IPO return.

Late last month, Schaeffer’s Senior Quantitative Analyst Rocky White took a dive into what happens the week after Black Friday, and if that reaction can tell us about the market going forward. On the list of 25 S&P 500 Index (SPX) stocks he pulled from the "General Retailers" sector, names at the top of the list had been the most bullish the week after Black Friday, while those at the bottom have been the most bearish. For perspective, WMT has seen an impressive climb up the charts, now up 23% year-to-date. The equity also hit a record high of $153.40 on Nov. 16.

Taking its place right in the middle of the chaos was blue-chip and retail powerhouse Walmart (WMT), one of the names most synonymous with the Black Friday frenzy. This chart indicated the equity tended to be positive 60% of the time the week after Black Friday. However, this slightly bullish leaning outlook didn’t quite come into fruition, as WMT subsequently suffered five-straight daily losses. All is not lost, however, as this week, a longer-term trendline has solidified itself as support, and if history tells us anything, it could springboard the equity back to within a stone’s throw from fresh record highs.

Digging deeper, Walmart stock is within one standard deviation of its 50-day moving average. According to Schaeffer's Senior Quantitative Analyst Chris Prybal, WMT has tested support at this trendline a notable nine other times over the past three years. The stock was higher a month later 78% of the time, and averaged a 2.7% gain for that time period. A move of similar magnitude from WMT's current perch would put the equity just shy of $151 -- a chip-shot within a new record high.

Another indicator suggesting Walmart stock is ripe for -- at the very least -- a short-term bounce, is the equity’s 14-day Relative Strength Index (RSI) of 24. In simpler terms, this low ranking sits comfortably in "oversold" territory, meaning the stock’s recent trend lower may be short-lived.

This all said, regardless of whether you err on the side of a bullish or bearish outlook on the retail chain, options are looking attractively priced. This is per the blue chip’s Schaeffer's Volatility Index (SVI) of 22%, which sits in the 14th percentile of all other annual readings. In other words, options traders are pricing in relatively low volatility expectations at the moment -- a boon for premium buyers.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, December 13.

United States Steel Corporation (NYSE:X) is down 5.4% at $17.56 this afternoon, following the company's fourth-quarter forecast of losses of 85 cents per share, which came in lower than analysts' estimated 57 cents per share loss. Cowen chimed in, lowering its price target to $15 from $18.56, warning against some of the steel manufacturer's risks, including changes in fragile supply and demand balance, a volatile global economy, and trade restrictions. 

Today's dip has X set to close back below its 10-day moving average for the first time since early November, though the 20-day still sits directly  below as potential support. While the equity has taken a breather since hitting a fresh annual high of $20 last week, it still sports a 54% year-to-date gain, and an impressive nine-month lead of 234%.

Circling back to analyst attention, the brokerage bunch isn't convinced by X's recent rally. The equity sports just one "strong buy" rating, compared to eight "hold" or worse ratings. Additionally, the 12-month consensus price target of $10.45 is a 40.6% discount to current levels. 

Short interest, meanwhile, has been rolling over, down 5.1% in the last reporting period. The stock is still heavily shorted, with these bearish bets making up 21.2% of its available float. Should more of these bearish bets begin to unwind, a short squeeze could put some wind at the equity's back.