Predicting Micron, Plus Did The Stock Market Get The Fed All Wrong?
It is another snow day here on Long Island, but when I was outside shoveling, I felt somewhat disappointed I didn’t get to use the snowblower. The forecasters were calling for about 15 inches of snow, but I think we may have gotten 4 inches so far. But it made think about forecasting stock prices and predicting the weather. Neither are easy to predict and seldom go as planned, no matter how knowledgeable or as much of an expert you may be. But the last two big storms, at least where I live, have been a bust. I laughed because I feel like some of the recent calls I have made have been as equally bad. But, hey, what can you do, you aren’t always going to be right, but realizing when you are wrong may be all that matters.
The Fed raised rates as expected, but then the stock market as usual confused itself, first rising sharply and then falling sharply, and pretty much finishing the day down about 20bps. But the bond and currency sent a pretty clear message; the Fed was not as hawkish as 2/3 of the market was expecting. The 2-year Treasury yield fell after the announcement to 2.31 percent from 2.37 percent, while the 10-year fell to 2.91 percent from 2.98 percent. Meanwhile, the dollar index fell from 90.05 before the news, to 89.70. But stocks react as though the announcement was hawkish, either that or stocks freaked out that even the Fed was worried over the tariffs. We shall see what the markets do tomorrow
Tomorrow is Micron’s big day, and shares have only surged 52 percent since February 8.
Analysts are looking for earnings to climb by 190 percent versus last year to $2.61 per share for the fiscal second quarter, while revenue is expected to rise by nearly 55 percent to $7.19 billion. The April $60 calls were the most active today, with almost 36k contracts traded, followed by 33k calls at the $55 strike price, and 30k of the $65 calls. It looks like most of the activity for the calls where on the ask side, and that would suggest buying, according to data from Trade Alert.
But the chart has flipped, and what was uptrend supporting the stock, has now become resistance, while the stock has hit a lot of seller at around $61.50.
If I had to give it my best guess, I think the stock goes down after results. I think the stocks run has been very steep, and it would suggest expectations may be very high. The call activity is very impressive, but the chart setup just bothers me, along with the reversal of the trend.
But keep in mind I’m not perfect, and if it is wrong, it is wrong. It is just the way it is.
What happened to Twitter? Well, first off it never broke out rising above resistance around $36.75. But should it breakout then it continues higher. Second, the colossal option owner of the January $37 calls still owns about 88k contracts. I think this stock is still worth watching for a potential breakout. I think the last day or so was just a setback.
Roku fell below support at $35, and it was not able to get back above it today. A bad sign. The borrow rate is now at -79 percent, an improvement, but shares are still extremely tight. The lock-up expiration looms, and I think the selling isn’t finished quite yet. With the stock price in the 30’s vs. the IPO price, distributions are likely to come.
I think that is going to be it for today.
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Tags: #sp500 #twitter #micron #roku #yields #dollar #currency