All posts by Tyler Craig

Monday’s Vital Data: Disney, Netflix and Wells Fargo

Options activity provides a look at expectations on DIS, NFLX, WFC

U.S. stock futures are headed for a quiet open this morning. Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.02%, and S&P 500 futures are up 0.03%. Nasdaq-100 futures have gained 0.02%.

In the options pits, call volume raced to the moon on Friday, helping to drive overall volume well above average levels. Specifically, about 24.2 million calls and 16.2 million puts changed hands on the session.

The CBOE saw call domination as well, with the single-session equity put/call volume ratio slamming to 0.54 — a two-week low. Meanwhile, the 10-day moving average slipped to 0.60.

Here were three stocks landing atop the options most-actives list: Disney (NYSE:DIS), Netflix (NASDAQ:NFLX) and Wells Fargo (NYSE:WFC).

Let’s take a closer look:

Disney (DIS)

Disney finally released the details of its highly anticipated streaming service during its investor day and WOW! Traders went absolutely bananas, sending DIS stock up 11.54% on historic volume. More on the price action in a minute, but first, here are the details.

Disney’s streaming service, Disney+, will debut in November at the cost of $6.99 per month or $69.99 annually. The price undercuts Netflix (NASDAQ:NFLX), the indisputable champ of the streaming space, by a substantial margin. Netflix plans currently range from $8.99 to $15.99. The number of movies and shows in the library will top 400 and include 25 original series and 10 original movies.

With Friday’s breakout, Disney shares have finally departed the range they’ve been locked in for four years. Now that resistance has finally fallen, and the stock is basking in record highs, the path of least resistance is unequivocally higher.

On the options trading front, call options were the hot ticket. Activity swelled to 625% of the average daily volume, with 752,989 total contracts traded. 68% of the trading came from call options.

The increased demand drove implied volatility higher on the day to 29%, placing it at the 61st percentile of its one-year range. Premium sellers will be happy to note this is the highest level of 2019.

Netflix (NFLX)

Disney’s gain will be Netflix’s pain. At least that was the knee-jerk reaction on Friday. While DIS stock surged 11.5%, NFLX tumbled 4.5%. The fear is warranted. Disney is willing to invest billions in delivering its unmatchable content at a price that makes Netflix appear downright expensive.

Starry-eyed analysts are already posting mind-blowing subscription estimates for Disney+. JPMorgan (NYSE:JPM) thinks it will eventually top 160 million which surpasses Netflix’s current number of 139 million. There is no doubt that a substantial portion of Disney’s growth will come from the millions of media lovers who currently subscribe to Netflix.

The next catalyst for NFLX stock will be its earnings announcement on April 16. We’ll see if the company can pull a rabbit out of the hat to distract investors who are now nervous that Disney has irrevocably stolen their future.

On the options trading front, calls won the day despite the stock’s drubbing. Activity ramped to 265% of the average daily volume, with 376,738 total contracts traded. Calls claimed 56% of the day’s take.

Implied volatility drifted sideways at 46% and remained at the 42nd percentile of its one-year range. Premiums are pricing in daily moves of $10, or 2.8%.

Wells Fargo (WFC)

While the Disney-Netflix drama certainly captured the imagination on Friday, bank stocks and their quarterly earnings also drove the market narrative. While some heavy hitters like JPMorgan and Bank of America (NYSE:BAC) soared on the day, Wells Fargo sunk like a stone.

But not initially! Wells Fargo was actually up about 2% after reporting earnings of $1.20 per share on $21.6 billion in revenue. Both measures topped expectations. The cause for the sudden downturn and eventual loss of 3% for the day was the bank slashing its forecast for net interest income.

With WFC now sitting well below falling 20-day, 50-day and 200-day moving averages, I see zero reasons for optimism. Buyers will find greener pastures in other banks right now.

On the options trading front, traders came after calls dominated during the volatile session. Total activity grew to 653%, with 352,033 contracts traded. Calls accounted for 66% of the take.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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Source: Investor Place

3 Top Tech Stocks to Trade Right Now

Source: Shutterstock

Large-cap tech stocks have led the great market rebound of 2019. Today we’ll look at three of the top stocks to trade in the sector.

Chart watchers are detectives seeking clues. These signals reveal the path of least resistance for prices and enable traders to discover attractive buy points that offer low risk and high reward. In analyzing the technology sector, two items stand out that suggest it should maintain a leadership role.

First, unlike the S&P 500 and Russell 2000, the tech-heavy Nasdaq saw increasing momentum on its last upswing. Trends with growing momentum have a higher likelihood of continuation than reversal. The second piece is related to the first: the tech sector’s relative strength. The tech sector’s outperformance is a good omen that should continue attracting performance chasers.

Here are three top stocks to trade.

Click to EnlargeSource: ThinkorSwim

Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ:AMD) is an active trader’s dream stock. Its massive volatility delivers quick profits to those on the right side of the trend. And it exhibits clean trending behavior responding well to common support and resistance zones.

Last week’s breakout resulted in a rapid three-day 20% surge amid heavy accumulation. Spectators who missed it now have a second chance. With this week’s pullback, AMD stock has now returned to the scene of the crime. This is as good a buy-the-dip pattern as there is. Watch for signs of an upside reversal such as breaking a prior day’s high, then buy.

Options traders might consider selling the May $22 puts for $90 of cash flow per contract.

Click to EnlargeSource: ThinkorSwim

Alphabet (GOOGL)

This year’s uptrend in Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) has been incredibly orderly. The series of higher pivot lows is consistent, and both the 20-day and 50-day moving averages are rising in bullish fashion. Additionally, the past three upswings have seen strong bullish candles with upside follow through. This type of clean price action has made GOOGL one of the easier stocks to trade of late.

With today’s mild selloff, GOOGL stock is working on its fifth down day in a row. The lower-than-average volume suggests we’re seeing garden-variety profit taking versus widespread distribution. Potential support looms close at $1150 and $1140, so I suspect a bounce is nigh.

If the stock can take out today’s intra-day high ($1,177), then buy the May $1175/$1195 bull call spread for around $5.

Click to EnlargeSource: ThinkorSwim

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) rounds out today’s trio with a shallow retracement pattern. The software king notched a fresh record high last week — $120.82 — on strong momentum. The reach to new heights came following a high volume breakout of last year’s high water mark.

Given all the bullishness, I see little reason why the current dip won’t get gobbled up like all its predecessors.

Implied volatility is low making long option plays attractive. I like buying the May $115/$125 bull call for around $4.

As of this writing, Tyler Craig held bullish positions in AMD. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

Source: Investor Place

3 Tech Stocks to Sell Before It’s Too Late

Source: Shutterstock

Growth stocks were hot … now they’re not. And that places sectors like technology in a precarious position. October was the great unwinding of the beloved FAANG trade and many other tech stocks. How long it lasts is anyone’s guess, but for now, these names are anathema.

Technical deterioration multiplied this week as sellers stuffed last week’s recovery attempts with prejudice. Long-term support levels like the 200-day moving average gave way and distribution days are continuing to add up, creating a toxic brew that is undoubtedly sickening buyers.

I’ve sifted the tech sector for weak tech stocks to sell and discovered three tempting candidates.

Apple (AAPL)

tech stocks to sell: Apple (AAPL)

Source: ThinkorSwim

The latest earnings report from Apple (NASDAQ:AAPL) took the wind out of its sails. Tepid forward guidance was all the reason traders needed to smash the sell button on AAPL stock. Yesterday’s swoon was significant for two reasons. First, it ushered AAPL stock below the 200-day moving average for the first time since April. History teaches that bad things happen below the 200-day. And even though it’s a king among tech stocks, AAPL is not immune to the lessons of history.

Second, AAPL stock’s correction officially became a bear market by reaching the 20% peak-to-trough threshold. While I wouldn’t recommend piling into shorts with the stock so oversold, I do suggest viewing rallies toward $200 with skepticism. Consider bearish option plays on any recovery attempt back toward that level.

Amazon (AMZN)

tech stocks to sell: Amazon (AMZN)

Source: ThinkorSwim

The correction in Amazon (NASDAQ:AMZN) has grown to become the largest in years. At last month’s lows, AMZN stock was down 28%. All major moving averages have been breached in the process. Significantly, we are now below the 200-day for the first time since February 2016.

A series of lower pivot highs and lower pivot lows has formed, confirming bears have wrested control of Amazon’s once-relentless uptrend.

For all its fury, the early November rebound did little in improving AMZN stock’s posture. Chalk it up as a dead-cat bounce. With AMZN working on its sixth down day in a row, it’s challenging to view today as a low-risk entry for new bearish trades.

Nonetheless, if you’re looking for a higher probability trade with a bearish tilt, sell the Dec $1800/$1810 call spread for $1.40.

Netflix (NFLX)

tech stocks to sell: Netflix (NFLX)

Source: ThinkorSwim

Although the trend in Netflix (NASDAQ:NFLX) had already reversed, it was the reaction to its latest quarterly report that acted as the nail in the coffin for NFLX stock. Nothing provides more explicit evidence of souring sentiment than a robust earnings-induced price gap higher that gets sold with prejudice.

The downswing that commenced the minute Netflix opened post-earnings on Oct. 17 sent the high-flier down $110 or just shy of 30% in two weeks. Since then, bears have continued to dominate Netlfix, which was once a Wall Street darling among other tech stocks. With NFLX stock now firmly below all major moving averages, the path of least resistance is lower.

Like AMZN stock, it’s hard to qualify Netflix as a low-risk entry for new bear plays. Either wait for a rebound in NFLX stock or use far out-of-the-money bear calls such as selling the Dec $340/$345 call spread for 55 cents.

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3 Stock Dips Begging to Be Bought

Stock prices are elevated, and volatility is depressed. What more could a bull ask for? The S&P 500, along with virtually every other major index, closed last week at yet another all-time high. But despite the broader market gravitating higher nearly every single day, there is quite a bit of rotation going on. And that works out to the favor of spectators seeking stocks to buy.

Indeed, pattern spotters had a fruitful weekend. Their bags are teeming with attractive setups, from retracements and breakouts to flags and pennants.

Three such setups will be on full display today. They’re all liquid and potential candidates for options trading as well. Check out these three stocks to buy. 

3 Stocks to Buy: Delta Air Lines (DAL)

3 Stocks to Buy: Delta Air Lines (DAL)

Source: OptionsAnalytix

Delta Air Lines, Inc. (NYSE:DAL) shares recently returned to an uptrend during a rousing, high-volume breakout that delivered shares back above all major moving averages. Traders unwilling to chase will be happy to note, however, that DAL stock just fell back to a pivotal support level, providing an attractive, low-risk entry.

What we’re seeing is a re-test of the breakout area ($49.50). And if old resistance becomes new support, we should see buyers step up to kick-off a new advance. If options trading is your gig, the implied volatility is still slightly elevated, so short premium strategies are worth a shot.

If DAL stock trades above Friday’s high ($50.69) then sell the Dec $48/$45 bull put spread for 53 cents.

3 Stocks to Buy: Johnson & Johnson (JNJ)

3 Stocks to Buy: Johnson & Johnson (JNJ)

Source: OptionsAnalytix

Johnson & Johnson (NYSE:JNJ) shares boast one of the cleanest pullback setups on the Street. They recently broke out of a three-month base on heavy volume. The catalyst for the surge was an earnings report which gave shareholders something to cheer about.

Last week’s profit-taking ushered JNJ back to its rising 20-day moving average, and now a low-risk entry is in the offing. With an implied volatility rank of 57%, options in JNJ remain pumped even more than DAL.

To profit from continued strength, sell the Dec $135/$130 bull put spread for 58 cents. If the stock remains above $135 for the next month, you’ll capture the max reward of 58 cents.

3 Stocks to Buy: Nike (NKE)

3 Stocks to Buy: Nike (NKE)

Source: OptionsAnalytix

Nike Inc (NYSE:NKE) shares have been locked in a trading range all year long. Earnings reports have sent the stock ping-ponging back and forth every quarter making it difficult for a directional trend to take root. With the recent upside breakout, buyers have once again wrested control, and I think NKE is worth trading to the long-side.

Last week’s pullback carried the stock right back to support, and Friday’s bullish reversal candle confirmed dip buyers want in. To join them, buy the Jan $55/$60 bull call spread for $3.40. You can more than double your money if NKE can rise above $60 over the next two months.

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Source: Investor Place