OPTIONS BEARS LINE UP FOR WALMART EARNINGS

WMT stock could see bullish analyst attention if earnings are strong

Retail earnings have been in focus all week, with Target stock getting a boost this morning from better-than-expected quarterly results. Dow component Wal-Mart Stores Inc (NYSE:WMT) is now set to report earnings before the market opens tomorrow, and the stock will try to duplicate its post-earnings performance from last year's May release, when the shares jumped 9.6% in the session after. Last quarter, WMT stock rose 3% in the session after reporting, and this time around the options market is expecting a 5% swing, regardless of direction, though recent traders are betting bearishly. 

Options Traders Bet on a Ceiling for WMT Stock

Heading into the event, short-term Walmart options traders are unusually put-skewed. This is based on the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.16, which ranks in the 89th percentile of its annual range. The most popular put during the past two weeks, based on open interest levels, was the June 75 strike, where the major options exchanges confirm mostly buy-to-open activity has taken place.

Meanwhile, the most popular front-month call during this time, based on open interest added, was the May 77 call. Data confirms mostly sell-to-open activity here, meaning many traders are betting on WMT stock holding below $77 through the end of this week, when the contracts expire. Traders have also employed the same strategy at the July 80 call, which was the most popular option overall during the past two weeks, based on open interest levels. 

Bullish or bearish, it's now a good time to buy Walmart options, even with earnings on the way. For instance, WMT has a Schaeffer's Volatility Index (SVI) of 18%, which ranks in the bottom one-third of readings from the past year. In other words, short-term options are relatively inexpensive at the moment, from a historical volatility perspective. 

WMT Stock Flirting With New Highs

On the charts, Wal-Mart stock has been strong in recent weeks, gaining 8.9% since its March 28 low of $69.33 to trade at $75.47. Last week, in fact, WMT shares touched a nearly two-year peak of $77.05. The stock could now find a floor in the $74-$75 range, which capped rally attempts in 2016. Further, an earnings beat could prompt some analysts to raise their price targets on WMT shares, which could provide an extra lift on the charts. At the moment, the stock's average 12-month price target comes in just below current levels, at $75.18. Meanwhile, only 10 of 23 analysts deem Walmart stock worthy of a "buy" or better rating, leaving the door open for upgrades in the event of an earnings beat.

TRUMP WOES LEVEL DOW JONES INDUSTRIAL AVERAGE; VIX SPIKES

With the DJIA off more than 200 points, the market's "fear gauge" has popped 23%

The Dow Jones Industrial Average (DJIA) is spiraling, as reports that President Donald Trump may have obstructed justice -- based on leaked memos from former FBI Director James Comey -- rattle the stock market. Specifically, stocks are reacting to concerns that Trump's legislative agenda will possibly take a back seat to the political drama in D.C. -- which some speculate could lead to impeachment -- with the Dow down more than 200 points, and the S&P 500 Index (SPX) and Nasdaq Composite (COMP) retreating from record highs. This risk-off backdrop has traders rushing toward safe-haven assets, with June-dated gold futures up 1.9% at $1,259.90 an ounce. Elsewhere, the CBOE Volatility Index (VIX) has surged almost 23% to trade near levels not seen since before the French election relief rally in late April.

Continue reading for more on today's market -- and don't miss:

• Analyst: "Buy the dips" on this Dow stock.
• While Target shares are hot post-earnings, this fellow retail stock is fresh off a new low.
• Plus, EXPR options traders brace for a volatility crush; AMD stock sells off; and the stock popping on sale news.

Among the names with unusual options activity is retailer Express, Inc. (NYSE:EXPR). More than 35,000 puts have traded -- 35 times the expected intraday rate, and a new annual high -- compared to zero calls. Almost all of the action has centered at the June 7 put, and if it's similar to Tuesday's activity, new positions are being sold to open. With Express earnings due the morning of June 1 and EXPR stock's 30-day at-the-money implied volatility in the 98th annual percentile, it's likely put sellers are hoping for a post-earnings volatility crush. EXPR stock was last seen trading down 1.9% at $7.79, fresh off a record low of $7.76.

Advanced Micro Devices, Inc. (NASDAQ:AMD) is the biggest decliner on the S&P, after the chipmaker failed to comment on an expected licensing deal with Intel. Pouring salt on the wound is a downgrade to "hold" from "buy" at Loop Capital. After AMD stock rallied ahead of its analyst day yesterday, it was last seen down 8.3% at $11.69 and back below its 120-day moving average.

Colgate-Palmolive Company (NYSE:CL) is one of the leading advancers on the SPX, after CEO Ian Cook said he'd be open to selling the consumer products giant for $100 a share. CL stock is trading up 2.8% at $73.63, at last check.

Amgen, Inc. (AMGN) Stock Has the Cure for Boring Portfolios

Create income from support levels in AMGN stock

The biotech sector has had an interesting 12-month period: the rhetoric of U.S. elections and now into the Trump era. So considering the barrage of headlines, it’s no surprise to see that Amgen, Inc. (NASDAQ:AMGN) stock has been through a huge 52-week range.

Except for brief periods of time, AMGN stock has moved in stride with the sector itself. Technically, Amgen bears overshot down on last October’s earnings, then AMGN stock bulls overshot up on the rebound, which is a normal pendulum effect.

This seesaw action is not unfamiliar to the sector as they tend to suffer through periods of headlines; some sector-wide, others self-inflicted.

Fundamentally, AMGN stock is cheap from a price-earnings perspective and relative to its competition. Management has a good record beating earnings expectations, yet most analysts currently have it as a “hold,” and therein lies part of the opportunity.

While I said that the stock is cheap from a relative value, this is different than saying I’d risk $160 per share here to buy it. I am not that brave and I would definitely require some room for error. To do that, I usually resort to trading Amgen stock using options instead. This doesn’t absolve me from needing a thesis, but it’s the implementation method that changes.

I am one to believe that extreme levels are usually overshoots so the 12-month highs and lows were undeserved, and somewhere in the middle lies the truth. Currently AMGN stock sits smack in the middle of the range, so it’s in theory closer to fair value by definition

Today, I want to share a trade to generate income by selling risk against proven support levels and this equidistance from high/low extremes would make for a decent starting point.

The Bet: Sell the AMGN Jan 2018 $115 put for $1.50, which has a 90% theoretical certainty that I would retain maximum gains. But if price falls through my strike anything below $113.50 per share would accrue losses for me.

With a 28% price buffer, I’m confident that I would be able to manage my risk against short-term price gyrations. Yet, it’s a good idea to buy cheap sacrifice puts to temporarily guard against the crash scenario.

Selling naked puts is not suited for everyone, so I could still accomplish the trade using spreads instead. By selling a spread I greatly limit the risk size yet still have a chance at yielding 9% on it.

Compare this with risking $160 now to buy the stock then need it to rally to $173-plus to match the performance of the sold spread.

How Facebook Inc (FB) Stock Can Double Your Money

FB stock is going to pull back; here's how to take advantage

It’s official. The Nasdaq-100 has entered a post-gravity world. Down days are becoming rarer than unicorns, and investor appetite for technology stocks is seemingly insatiable. Facebook Inc (NASDAQ:FB) is among the stocks leading the charge, and that’s nice if you’ve been long. But traders looking for opportunity in FB stock at this point should be looking lower.

The Powershares QQQ Trust (NASDAQ:QQQ) is up a mouthwatering 18% year-to-date, led by tech titans such as Facebook, Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc.  (NASDAQ:AMZN).

But while most of big tech is skirting the stratosphere, FB stock has cobbled together a nice little pullback for would-be buyers.


Let’s investigate what looks to be a low-risk opportunity.

Since notching another in a long line of all-time highs earlier this month, Facebook stock has quietly receded 2.5% to its current perch. While a deeper retracement would have been ideal, the bullish undertones in tech-land have prevented any substantial pullbacks from materializing.


Sadly for dip buyers, this is about as good as it gets these days

Of course, the shallowness of the retreat does speak to the extreme bullish sentiment surrounding FB and friends. So in that sense, small pullbacks like this one should be cheered by those rooting for higher prices in the weeks to come.

The past few days of mild profit-taking have ushered Facebook shares to their rising 20-day moving average. This oft-watched smoothing mechanism has been as good a spot as any for support to form.

Watch for Facebook to pop above $151 or so to confirm its next up-leg has begun.

How to Make Bank on FB Stock
Bull call spreads offer a low-cost, yet highly leveraged, route for betting on a continuation of Facebook’s uptrend. Buy the Jul $150/$155 bull call spread for $2.15. The position consists of buying to open the Jul $150 call while selling to open the Jul $155 call.

You will incur the max loss of $2.15 if FB stock sits below $150 at expiration. The max gain is limited to the spread width minus the initial cost, or $2.85, and will be captured if the stock can rise above $155 by expiration.


By risking $215 to obtain $285, this option spread offers an attractive 133% return — or more than double your money.

APPLE, UNITEDHEALTH, CLOVIS ONCOLOGY UPGRADED

Analysts are weighing in on iPhone parent Apple Inc. (NASDAQ:AAPL), fellow Dow stock UnitedHealth Group Inc (NYSE:UNH), and cancer treatment developer Clovis Oncology Inc (NASDAQ:CLVS). Here's a quick roundup of today's bullish brokerage notes on shares of AAPL, UNH, and CLVS.

AAPL Stock Trades Lower After Qualcomm Complaint

QUALCOMM, Inc. (NASDAQ:QCOM) has filed a breach of contract complaint against several Apple suppliers, claiming they have not paid royalties, deepening the legal rift between the two tech companies. Though news of QCOM's countersuit to Apple has done little to stop AAPL stock from hitting record highs in recent weeks-- most recently on May 15, when the equity hit $156.65 -- the shares are trading 1.1% lower at $153.71 amid broad-market headwinds.

Nevertheless, Morgan Stanley and BMO expect Apple stock to continue its trek into uncharted territory -- boosting their respective price targets to $177 and $170 -- with the latter saying there's historical precedent for an additional 10% upside to the p/e multiple. All eyes will continue to be on Apple in coming weeks, when the tech titan unveils a new lineup of MacBooks at its Worldwide Developers Conference (WWDC) in early June. Additionally, Apple said it has started manufacturing iPhones in India to try and expand its presence in the critical market.

Mizuho Securities Says to "Buy the Dips" on UNH Stock

UNH stock shed nearly 2% yesterday, as reports surfaced the insurance giant had overcharged Medicare. Today, the shares are down 0.9% to trade at $166.67, after the Justice Department said it is suing UnitedHealth Group for possible fraud. Mizuho Securities is telling traders to not panic, though, and "buy the dips because the market almost always looks past this kind of news in short order." The brokerage firm has a "buy" rating on UNH shares and a $200 price target -- well above the stock's May 1 record peak of $176.14. 

While today's decline has UnitedHealth Group stock paring its modest year-to-date gain, UNH options traders are likely hoping for even bigger losses. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 6.64 sits above nearly all other comparable readings taken in the past year. In other words, puts have been bought to open over calls at an annual-high clip in recent weeks.

CLVS Stock Upgraded at J.P. Morgan Securities

Since hitting an annual high of $74.94 on March 16, CLVS stock had surrendered nearly 34%, based on last night's close at $49.56. J.P. Morgan Securities said there was "no clear fundamental reason" for this sell-off, but it created an attractive risk/reward opportunity. As such, the brokerage firm raised its rating on Clovis Oncology shares to "overweight" from "neutral" and its price target to $72 from $58. While CLVS is up 2.6% this morning at $50.85, short sellers have been in control during the stock's longer-term retreat. Short interest is up almost 10% from the March 15 reporting period, and now accounts for more than 27% of the stock's float.

Article by MagnusYard.

QUALCOMM, TARGET, JACK IN THE BOX NEWS TODAY

Target stock is moving higher thanks to strong earnings

Stocks are getting hammered this morning, as traders express concern about the latest political drama stalling the Trump agenda. Among specific stocks on the move are tech concern QUALCOMM, Inc. (NASDAQ:QCOM), retail stock Target Corporation (NYSE:TGT), and fast-food franchise Jack in the Box Inc. (NASDAQ:JACK). Here's a quick look at what's moving shares of QCOM, TGT, and JACK. 

QCOM Stock In Focus Amid Apple Lawsuit

QUALCOMM is suing four Apple Inc. (NASDAQ:AAPL) manufacturers, accusing them of not paying royalties. The QCOM-AAPL saga is nothing new, though; earlier this year, Apple sued QCOM for refusing to pay $1 billion in rebates and overpricing chips. QCOM shares have opened 0.7% lower at $55.55, as they continue to trade just above their year-over-year breakeven level. Meanwhile, analysts have remained mostly bullish on Qualcomm stock, with 12 of 21 giving the shares a "strong buy" recommendation. 

TGT Stock Gets a Post-Earnings Bump

Target stock is up 4.3% this morning at $56.86, thanks to the retailer's better-than-expected first-quarter earnings report -- a relative novelty for the retail sector this earnings season. The shares have still struggled longer term, suffering multiple bear gaps since topping out near $80 back in November. Despite this, options traders have been taking a rather bullish stance on TGT stock. This is according to its 50-day call/put volume ratio of 1.55 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 94th percentile of its annual range. 

Qdoba Spin-off Hopes Boost JACK Stock

Jack in the Box last night reported better-than-expected first-quarter earnings, and said it's evaluating "potential alternatives" for its Qdoba business. The shares are up 10.2% to trade at $112.30 -- within striking distance of their record high of $113.30 from December -- bringing their 12-month gain to over 50%. This is bad news for short sellers. That is, short interest increased 11.4% in the last two reporting periods, and now these bears control a week's worth of buying power, based on JACK's average daily volume.

Article by MagnusYard.

DISNEY, SQUARE, URBAN OUTFITTERS DOWNGRADED

Analysts are weighing in on blue-chip media stock Walt Disney Co (NYSE:DIS), mobile payments issue Square Inc (NYSE:SQ), and retailer Urban Outfitters, Inc. (NASDAQ:URBN). Here's a quick roundup of today's bearish brokerage notes on shares of DIS, SQ, and URBN.

ESPN Concerns Spark Downgrade for DIS Stock

Macquarie Research downgraded Walt Disney stock to "neutral" from "outperform," and slashed its price target to $105 from $125 -- a discount to DIS' closing price of $107.98 on Tuesday. The brokerage firm cited concerns over subscriber declines at ESPN, and Disney's overall exposure to the cable industry. DIS stock was last seen trading down 1.9% at $105.97 -- at risk of closing south of its 120-day moving average for the first time since Nov. 10. Most analysts remain optimistic toward Disney shares, though, with roughly two-thirds of brokerage firms maintaining a "buy" or "strong buy" rating.

SQ Stock Receives Mixed Analyst Attention

Square stock hit a record high of $20.69 on Tuesday, bringing its year-over-year lead to 122%. While SunTrust Robinson, Stifel, and RBC lifted their respective price targets to $22, $23, and $24, BTIG downgraded SQ stock to "neutral" from "buy." In response, SQ stock is down 3% to trade at $19.73, providing temporary relief to one group of traders. Specifically, short interest on Square has surged more than 50% from its mid-February annual low, and now accounts for a healthy 6.6% of the stock's available float.

URBN Stock Active After Earnings

Urban Outfitters reported weaker-than-expected per-share earnings and revenue, and said comparable-store sales fell by more than anticipated in the latest quarter. Jefferies, SunTrust Robinson, and Wunderlich subsequently reduced their respective price targets on URBN stock to $30, $25, and $20. At last check, Urban Outfitters shares were trading down 2% at $20.06, and earlier hit a new annual low of $19.74. With the stock now down 30% year-to-date, short sellers are unlikely to disturb their bearish positions. Short interest accounts for almost one-fifth of URBN's available float, or 8.1 times the average daily pace of trading.

Article by MagnusYard.