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Monday’s Vital Data: Applied Materials, Alibaba and Nvidia

Tyler Craig

U.S. stock futures are adding to Friday’s sharp rebound. The recovery is likely being aided by the action in the bond market. Bond prices are weakening, and yields are starting to snap-back from their record low levels.

Monday's Vital Data: Applied Materials, Alibaba and Nvidia

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Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.1.09% and S&P 500 futures are higher by 1.06%. Nasdaq-100 futures have added 1.33%.

In the options pits, call volume led the way ahead of the weekend while overall volume racked up to above-average levels. Approximately 21.2 million calls and 19.2 million puts changed hands on the session.

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With buyers returning to the field, the CBOE single-session equity put/call volume ratio plunged back down to 0.67. Friday’s market recovery and this morning’s strong follow-through proves once again that spikes seen in this metric like last week are reliable signals that fear is overdone and a bottom is nigh. The 10-day moving average dropped to 0.76.

Options activity was hopping in companies reporting quarterly reports. Applied Materials (NASDAQ:AMAT), Alibaba (NYSE:BABA) and Nvidia (NYSE:NVDA) all saw heavy volumes amid volatile trading sessions.

Let’s take a closer look:

options trading

Applied Materials (AMAT)

Applied Materials shares saw a sharp uptick in volatility Friday after the release of third-quarter earnings. Early morning weakness took AMAT stock down as much as 5.4% before buyers emerged and pushed it back to finish down 1.1%.

The semiconductor company posted earnings per share of 74 cents on sales of $3.56 billion. Although both metrics marked a double-digit, year-over-year decline (29% and 14%, respectively), they still beat the Street’s estimates.

AMAT bulls should be pleased with Friday’s price performance for two reasons. First, the stock rallied back to close above the 50-day moving average, which kept its intermediate uptrend intact. Second, it also closed above its prior pivot low after trading below it throughout the morning. Both successes suggest buyers aren’t ready to relinquish control, and the path of least resistance remains higher.

On the options trading front, puts outpaced calls by over two to one. Total activity swelled to 299% of the average daily volume, with 92,107 contracts traded; 67% of the trading came from put options alone.

Premiums were baking in a gap of $2.54 on earnings so with the stock closing down only 53 cents, volatility sellers came out victors. Implied volatility dropped to 19%, and premiums are only pricing in daily moves of 99 cents or 2.1%.

Alibaba (BABA)

Alibaba stock is on the mend after reporting earnings numbers worth celebrating last week. For the fiscal first quarter, China’s e-commerce juggernaut posted revenues of $16.74 billion, marking a 42% increase versus the year-ago quarter. The robust top-line growth helped drive adjusted income per share to $1.83.

Wall Street analysts were forecasting earnings of $1.46 per share on revenue of $15.8 billion.

A strong two-day rally carried BABA stock into the weekend and shares are up another 1.8% premarket. Its price trend has been a hot mess for months, but it’s at least now back above all major moving averages. Overhead resistance looms close at $180, so that’s the ceiling that needs to be smashed for the upside momentum to really fire up.

On the options trading front, traders came after calls with a vengeance. Activity swelled to 192% of the average daily volume, with 346,809 total contracts traded. Calls claimed 76% of the session’s sum.

With earnings now in the rearview mirror, implied volatility sank to 31% placing it at the 19th percentile of its one-year range. Premiums are pricing in daily moves of $3.46 or 2%.


Nvidia (NVDA)

Nvidia shares have spent much of 2019 mired in a trading range, but improving earnings may finally give bulls much-needed firepower. The graphics-chip giant released second-quarter earnings for fiscal 2020 after the bell Thursday and investors were pleased with the performance.

Although the year-over-year numbers saw double-digit percentage declines, they surpassed the Street’s estimates. For the quarter, revenue came in at $2.58 billion, and EPS arrived at $1.24.

The beat was enough to push NVDA stock up by 7.3%. Unfortunately, the price trend remains as uninspiring as ever. NVDA remains in the middle of its range and needs to break through $180 resistance before a bona fide uptrend takes root. Friday’s rally was a big first step, but many more are required before it can reclaim its former uptrend’s glory.

On the options trading front, traders favored calls throughout the session. Activity rose to 246% of the average daily volume, with 95,629 total contracts traded. Calls added 64% to the day’s take.

Implied volatility plunged to 38% or the 17th percentile of its one-year range. Premiums are now pricing in daily moves of $3.79 or 2.4%.

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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