Blue-Chips Keep Momentum/ Profit Alert (BABA)

Blue-Chips Keep Momentum/ Profit Alert (BABA)

8:00am (EST)

Thursday was a mixed with the blue-chips showing continued strength while the other major indexes took a breather. The nervousness could continue today as the weekend approaches and January winds to a close. Volatility stayed subdued but remained a hot topic to the pretenders that call themselves experts on the VIX. Earnings after yesterday's close could impact today's action and possibly providing us with another New Trade.

The Dow gained 32 points, or 0.2%, to finish at 20,100. The blue-chips held positive territory for much of the session aside from a one-point slip while reaching a lifetime intraday peak of 20,125. Fresh resistance remains at 20,200-20,350. Support is at 19,900-19,800.

The S&P 500 slipped nearly 2 points, or 0.2%, to settle at 2,296. The index traded in a tight 6-point range with the bulls pushing a record high of 2,300.99 shortly after the open. Lower resistance at 2,300-2,325 was tagged but failed to hold. Near-term support is at 2,280-2,275.

The Nasdaq dipped a point, or 0.02%, to close at 5,655. Tech made a record run to 5,669 on the open to keep fresh resistance at 5,700-5,750 in the mix. Short-term support at 5,600-5,575 easily held following the pullback to 5,647.

The Russell 2000 gave bak 6 points, or 0.5%, to end at 1,375. The small-caps managed a 2-point trip to 1,384 at the start of trading with resistance at 1,385-1,400 holding. Support at 1,370-1,365 easily held following the backtest to 1,374.

The S&P 500 Volatility Index ($VIX, 10.63, down 0.18) tested a high of 11.01 intraday with lowered resistance at 11-11.50 holding. The late low to 10.60 continued to push 10 and single-digits.

We closed out another monster triple-digit winner as shares of BABA triggered our Profit Alert!

Sink or Swim Quarter for SBUX

Sink or Swim Quarter for SBUX

The market got off to a good start this morning as the major indexes continue to work their way towards records highs and a three-session win streak. Geopolitical news has taken center stage for the second half of action as President Trump continues to roll out his ambitions plans for America. Perhaps a cancelled meeting by Mexico's President for next week about "The Wall" has sparked some nervousness and will remain an ongoing story.

Aside from the choppy action, earnings are still in focus and have been the real catalyst for the indexes breaking out to fresh highs this week. One stock that will sink or swim in after-hours trading will be Starbucks (SBUX, $58.47, down $0.23). Wall Street will be looking for a profit of $0.52 a share on revenue of $5.85 billion. The company has matched twice and topped estimates by a penny, twice, over the past four quarters.

While we have no doubt the company will perform the same feat this go around, we do believe their revenue numbers come in a tad light. The recent retirement announcement of CEO, Howard Schultz, certainly has to make current shareholders feel uneasy about the future success of Starbucks. Although these fears were quickly debunked as the new CEO was introduced, he certainly isn't Howard.

We wouldn't compare this story to Steve Jobs, Tim Cook, and Apple, but you get our drift. Given this backdrop, it is very tempting to take an earnings trade.

The SBUX February 57.50 puts (SBUX170217P00057500, $1.00, up $0.10) can be targeted by bearish traders looking for a pullback to double-nickels in the stock. These options would double from current levels if shares fall below $55.50 on the news, or trade below this level by mid-February.

The SBUX February 60 calls (SBUX170217C00060000, $0.70, down $0.05) can be targeted by bullish traders looking for a surge past $60 on a blowout quarter and raised guidance. The options would double, technically, if shares clear $61.40 by mid-February.

We are more bearish, than bullish, on StarChucks.

The Dow is up 22 points to 20,090 while the S&P 500 is off 2 points to 2,296. The Nasdaq is declining 3 points to 5,652 and the Russell 2000 is lower by 7 points to 1,375.

4Q Earnings Heat Up

4Q Earnings Season Heats Up

8:00am (EST)

The bears opened the shortened weak with a win as the recent bullish Tuesday's were outweighed by a shaky dollar. News that then President Elect, Donald Trump, said in an interview with the Wall Street Journal the US dollar was "too strong" led to some uneasiness and overall market weakness.

The rest of the week was shaky as December lows came into play but Friday's action kept the bottom of the trading ranges intact. With fourth-quarter earnings season coming into full swing, the bulls will need to show continued strength while trying to regain momentum for another possible run at all-time highs.

The Dow jumped 94 points, or 0.5%, to finish at 19,827 on Friday. The blue-chips held positive territory throughout the session with the high reaching 19,843. Resistance at 19,900-20,000 held tight with a close into this level a bullish start for the week. A move above the latter gets 20,200-20,350 in play. Support is at 19,800-19,725 with a move below 19,700 likely leading to 19,600-19,500 and the 50-day moving average. For the week, the index fell 58 points but is still up 65 points for the year.

The S&P 500 climbed 7 points, or 0.3%, to settle at 2,271. The index made a run to 2,276 shortly after the opening bell to clear lower resistance at 2,275-2,300. Although this level failed to hold, the close above 2,270 was semi-bullish. Support is at 2,260-2,250. A move below the latter could lead to a continued backtest to 2,240-2,235 and the 50-day moving average. The S&P 500 fell 3 points for the week, and is 33 points, year-to-date.

The Nasdaq added 15 points, or 0.3%, to close at 5,555. Tech raced to a high of 5,574 on the open with lower resistance at 5,575-5,600 holding by a point. Support remains at 5,525-5,500 with last week's lows reaching 5,527 on Tuesday and 5,528. If these levels hold throughout the week, we can say it was a "double bottom". However, a breech of either aforementioned numbers would be a bearish development. The Nasdaq fell 19 points last week and for 2017, is showing a 172-point gain.

The Russell 2000 popped a 6-pack, or 0.5%, to end at 1,351. The small-caps traded up to 1,355 midday but failed fresh resistance at 1,360-1,365. The lower highs and lower lows throughout last week pushed lower support at 1,345-1,340 and the 50-day moving average. There is additional risk to 1,325-1,320 if this level fails to hold over the near-term. Last week's 21-point dip led the overall market pullback with the index now showing a 6-point loss for the year.

The S&P 500 Volatility Index ($VIX, 11.54, down 1.24) stayed deflated throughout Friday's session with the low tapping 11.53. The 10% pullback and close just outside of support at 11.50-11 looked bullish. The 52-week low is at 10.93 with 10 and single-digits looking possible on a move below 10.75. Resistance is at 12.50-13.50 and the 50/100-day moving averages with continued closes above the latter leading to 14.50-15 and a breech of the 200-day moving average.

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Fresh Lows in Play

Fresh Lows in Play

8:00am (EST)

The bears are starting to look dangerous as they were able to push fresh 2017 lows and early December levels. The bottom of the trading ranges are still holding but another lower close ahead of the weekend could be a cause for concern. Inauguration Day has a history of more negative closes than positive, and the talking heads that have pegged this the "Trump rally" are now calling for a "Trump Dump". I don't like to label rallies or selloffs, as I rely more on the technical setup, but the bulls need to show some strength today. If not, today and next week could get rocky.

The Dow dropped 72 points, or 0.4%, to end at 19,732. The blue-chips opened slightly higher while making a run to 19,824. Resistance at 19,900-20,000 easily held with the index giving up its gains a half-hour into trading. The late day low tapped 19,677 with lower support at 19,800-19,725 holding. The breech below the latter gets backup support at 19,600-19,550 in play.

The S&P 500 slipped 8 points, or 0.4%, to finish at 2,263. The index tested a high of 2,274 shortly after the open but failed lower resistance at 2,275-2,300 holding by a point. Support at 2,260-2,250 held following the backtest to 2,258. A move below the opens up risk to 2,240-2,235.

The Nasdaq fell 15 points, or 0.3%, to settle at 5,540. Tech made headway to 5,571 at the start of trading with lower resistance at 5,575-5,600 standing strong. Upper support at 5,525-5,500 held with the low checking in at 5,528. This was a slightly bullish signal but I have warned a close below 5,500 would be a bearish development.

The Russell 2000 rumbled 12 points, or 0.9%, to close at 1,345. The small-caps managed a 2-point run to 1,360 on the open but failed resistance at 1,365-1,370. The steady slid to 1,342 intraday held lower support at 1,350-1,340. The bearish action was the most disruptive to the market and a close below the latter and the 50-day moving average could lead to additional weakness to 1,325-1,320.

The S&P 500 Volatility Index ($VIX, 12.78, up 0.30) traded down to 12.17 during the morning with support at 11.50-11 holding. The high reached 13.28 and breeched the 50-day moving average before holding into the closing bell. The close above lower resistance at 12.50-13.50 warrants caution with a move above the latter likely leading to 14.50-15, quickly.

From desk to press, futures look like this: Dow (-14); S&P 500 (+2); Nasdaq 100 (+9).

Goldman Sachs (GS) Reports on Wednesday

Shares of Goldman Sachs reached a fresh 52-week peak of $247.77 on Friday and could hold the key for the Dow to trip 20,000 this week. The top of an early December, or 6-week trading range, is on the verge of a breakout if the company comes in with a beat-and-raise quarter. A 5% move could have GS pushing $260 or $235 this week. The 50-day moving average is 10% away and could come into play on an earnings miss.

The options for GS are very expensive chips and an earnings trade would be risky with the near-term regular January options expiring on this Friday's close. The GS January 250 calls (GS170120C00250000, $1.90, down $0.75) are a lottery ticket but would double if shares clear $254 on Wednesday's results, or by Friday's close. The GS January 240 puts (GS170120P00240000, $2.40, down $1.10) can be targeted by giddy bearish traders targeting a move below $235. If cleared, the aforementioned put options would also double.

With premiums approaching $4 for both options, a strangle option trade would also be a high-roller bet. The break even points would be at $254 and $236 with a double occurring if shares clear $258, or fall below $232. We will be sitting on the sidelines with GS but we are looking at the Brokerage stocks as possible earnings trades this week.

How to Trade E*Trade’s Earnings

A sneaky play without taking the direct hit of an earnings announcement might be a bullish trade on E*Trade Financial (ETFC, $36.93, up $0.21). Shares have been in a strong, tight range for two weeks but have been setting higher highs and fresh 52-week peaks since mid-November.

Analysts are expecting a profit of $0.42 a share on revenue just shy of $502 million. The high estimate is pegged at $0.45 a share with the low at $0.39. The high revenue estimate is north of $517 million while the lowball is at $459 million. The company has topped estimates by 12 cents and 10 cents, twice, over the past three quarters.

The ETFC February 38 calls (ETFC170217C00038000, $0.95, up $0.15) look attractive at current levels and would give the trade a month to play out. If ETFC shares can clear $40 by mid-February, these options would easily double from current levels. Of course, an earnings miss, or lowered guidance, could cause a pullback in the stock.