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TFC Commodity Trading Forum

Wall Street's Wednesday Lunch Options

Interesting favor for a jolly ol’ rate hike, optimism in front of the Fed and stateside housing data tag Dow watchers coveted 12,000 briefly in Wednesday’s first half. As of 11:30 ET the DJ-30 has deconstructed gains back to the unchanged level in more of the same VIX’ing and uncorrected price behavior.

Stateside bulls managed (somehow) to get off to a jolly good start this morning on word of a second vote in favor of a rate hike by a Bank of England official and bringing the tally to 7-2. However, the extra nod towards nipping inflation in the bud was established prior to yesterday’s grievous “awful, dreadful” surprise slip of -0.50% in the UK’s Q4 GDP.

On the homegrown economic front, stronger-than-forecast new home sales for December produced a collective “Buy, Buy, Buy!!” response worthy of sending the Dow Industrials briefly above the closely-watched and now “sell-e-brated” 12,000 level.

Analysts coming to expect 300,000 units were pleasantly surprised with a larger than expected figure of 329,000 and one good for a 17.5% month-over-month increase.

On the corporate side, it’s another session of heightened expectations regarding earnings being more or less built into market prices. By and large and irrespective of beating, missing or merely coming in with in-line, ho-hum results, shares of companies reporting are succumbing to profit-taking.

In the spotlight and helping drag the Dow back below the 12,000 tarmac, shares of Boeing (BA) are off -3.50% after beating easily with profits of $1.56 per share compared to estimates of $1.12 but coming up short on revenues.

Boeing also issued a gloomy FY11 below views earnings forecast of $3.80 - $4.00 per share versus consensus estimates of $4.55. Technically, Wednesday’s skid in shares puts BA about midway into an existing base, nine months in construction.

Over in the Naz’ 100, Computer Associates (CA) is shedding -8.00% despite or due to its two cent profit beat, mostly in-line sales increase of 3.8% and issuance of matchy-matchy FY11 EPS and revenue guidance bracketing Street forecasts.

Technically and after a trendy run of about 45% from 2010’s final quarter, shares of CA are a victim of their own success with popular trend line support of notice such as the 50SMA, falling to the wayside with the greatest of ease.

In the No. 2 spot, semiconductor outfit Altera (ALTR) is another example underscoring less-than-appreciative earnings reactions by investors.

The company pulled off a penny beat on profits of $0.72 per share, saw slightly better-than-forecast sales growth of 52.2% and issued above-views, albeit sequentially declining 1% - 5%, Q1 revenue guidance of $527.6 - $549.8M vs. $524.92M. Intraday, shares of ALTR are off -3.75% and testing 50SMA for possible support.

One name making the right connection with bulls is computer networking shop Juniper (JNPR). Shares are up 6.00% after managing a two cent beat on earnings of $0.39 per share, slightly better-than-expected revenue growth of 26.4% and issuing a mixed but, close-to-views profit and sales forecast for its first quarter.

Part of investors rousing good support that’s been good for catapulting shares above bear flag and 50SMA resistance is likely tied to the prior week’s technical fallout courtesy of F5 Networks (FFIV). Wednesday’s bullish response has also proved fruitful to yesterday’s opined, dominant option order flow of put sellers and bullish verticals, though failing to provide reverse calendars with profits.

In those often but as of late, quiet intertwined markets of notice, shares of the United States Oil Fund (USO) are up 0.70%. The price action looks to confirm Golden Cross support on a pullback within an existing uptrend which began back in late August.

Today’s bid in the USO comes despite a large weekly inventories increase of 4.84M barrels with traders apparently doing some bullish jockeying in front of this afternoon’s FOMC decision slated for 2:15 ET.

For option traders looking to position alongside their stock trading brethren, the USO is a highly liquid instrument with one point wide strike distances and enabling the whole kit and caboodle of strategies beyond the simple “Buy, Buy, Buy!” variety.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site