2 Earnings Movers Flirting With Key Technical Levels

UPS is breaking down after earnings, while ZBH is breaking out

Alex Eppstein
Jan 31, 2017 at 11:18 AM
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United Parcel Service, Inc. (NYSE:UPS) and Zimmer Biomet Holdings Inc (NYSE:ZBH) are moving in markedly different directions after their respective earnings reports. UPS' quarterly profit fell short of the Street's expectations, pressuring the stock 6.4% lower to $109.59. By contrast, ZBH is breaking out on an earnings beat, up 3.4% at $119.30. Amid their sharp swings, both stocks are also testing key Fibonacci retracement levels.

As you can see below, UPS has breached the 23.6% Fibonacci retracement of its 2016 low and high -- a technical level that had acted as support since November. The package delivery stock is now flirting with its 40-week moving average and approaching its 38.2% retracement level, searching for a foothold to stop the bleeding.

ups weekly fibonacci retracement 40 week moving average jan 31

UPS' breakdown on the charts has its options flying off the shelves at eight times the expected intraday rate, with the now in-the-money June 115 put leading the way. In recent weeks, however, call buying has dominated at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio of 1.73 ranks in the bullishly skewed 84th annual percentile. Suffice it to say, this morning's pullback could have call buyers feeling the heat.

Things look much better for ZBH. The healthcare stock has broken through previous resistance at the 38.2% retracement of its 2016 low and high. This Fibonacci level had acted as resistance in recent weeks, but could now reverse to a supportive role -- as it did in mid-2016.

zbh daily fibonacci retracement jan 31

Today's technical breakout should cheer bullish options players. At the ISE, CBOE, and PHLX, traders have bought to open 1.55 ZBH calls for every put in the past 10 weeks, with the corresponding call/put volume ratio ranking only 12 percentage points from a 12-month peak. Albeit amid low absolute volumes, today's most active strike is the out-of-the-money March 130 call, as one speculator may have purchased a fresh 150-contract block.

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