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Wall Street's Friday Lunch Options

By Chris Tyler, Optionetics.com | Fri February 24, 2012 7:51AM PT


Time and price topping signs, as well as a seasonally stiff pinch at the pump, remain but a minor thorn for a bull still confidently trying to do business as usual. As of 10:30 ET the SP-500 (SPY) is up 0.20% and still acting resistant to the likes of Fibonacci after an extended run.

It’s Friday and with the markets at or near intermediate highs, a desensitized bear or an increasingly confident bull is doing what they do best in front of the weekend—and a time where the only risk is in not holding one’s favorite ticker.

On the corporate confessional side, shares of tarnished insurer AIG (AIG) are on the mend with bulls this morning. Investors have sent shares jumping by 5.50% and striking 7 month highs following a profit beat of $0.17 on earnings of $0.82 per share and income of $1.6B compared to the year ago period’s loss of $2.2B.

Assisting in AIG’s technical bid, management assured investors qualitatively by stating it anticipates to remain competitive in all of its core insurance businesses.

Shares of cloud and CRM software outfit Salesforce.com (CRM) are up 7% and “handling” a nice-looking breakout from a bottoming cup-with-handle pattern of three months despite delivering mixed results.

By the numbers, for its fourth quarter Salesforce.com managed a bottom-line beat of $0.03 on earnings of $0.43 per share on slightly stronger-than-expected sales growth of 38.3%.

Looking forward, conditions are a bit cloudier as the company issued below views Q1 EPS guidance of $0.33 - $0.34 per share compared to Street estimates of $0.36 and FY13 earnings of $1.58 - $1.62 versus $1.64. At the same time, sales for both periods are expected to come in above forecasts with ranges of $673 - $678M versus $663M and $2.92 - $2.95B versus $2.91B respectively.   

For the bears, specialty retail is seeing some dropping rather than investors shopping in both Decker’s (DECK) and Crocs (CROC). Shares of are off 11.50% and 7% respectively and putting bottoming efforts at risk with today’s technically bearish reactions following disappointing outlooks.

For its part, Decker’s beat profit views by a nickel on earnings of $3.18 and easily topped sales forecasts of $562M with actual revenues of $604M on growth of 40.4%. However, a forecast of flat earnings for its FY12 has sent chills down the spines of bulls maybe caught wearing Uggs; and not necessarily the kind of gear required for a slip and fall of this nature.

And in passing, specialty metals play Molycorp (MCP) is still digging a technical hole and much to the chagrin of our own analysis of the company’s technical tea leaves and options in Thursday’s Trader’s Radar column. Shares are off 7.0% after Molycorp beat by a penny on earnings of $0.41 per share, saw slightly better-than-forecast but stunning-looking sales growth of 512% and reaffirmed its FY12 production outlook.

The latter point of keeping up production could be viewed as a burden of doubt for bulls as underlying prices in the likes of rare earths metals continue to be under pressure. That of course is unlike other precious little nuggets (SLV, GLD) these days, which after doing their own technical digging programs, have, and against the odds at times, risen to the occasion.  

In officially-sanctioned economic news, a pair of intraday releases on sentiment and housing has proved pleasing for the headlines but less so for traders. Michigan’s Consumer Sentiment Survey for February saw an increase of 2.8 points to 75.3 and above estimates of 73.0.

At the same time, new home sales for January beat views by 6,000 in setting in annualized count of 321,000 units, though slightly below December’s levels which enjoyed an upward revision to 324,000.

Intraday and in those intertwined markets of influence, the SP-500 continues to be resistant to profit-taking despite challenging its May 2011 highs as Fibonacci 13 and 21 week time cycles and massive runs of 13% and 27% from those corrective lows complete this week.

The CBOE Volatility Index ($VIX) is up narrowly but only after hitting two week lows of 16.50%. The action puts its short-term 10SMA differential near a stretchy warning of 13% which suggests investor confidence is much closer to complacent behavior than not.   

And the US Oil Fund (USO) has extended Thursday’s near 2% drive and puts its two week run at more than 9% to fresh 10 month highs. Intraday however, USO is looking a bit fatigued in trading flat and at session lows.

Support for black gold continues to be dictated by this week’s technical breakout, as well as geopolitical supply risk concerns being priced in by optimistic bulls’ expectant of turbulent times ahead. For still at-risk global economies so dependent on a steady flow of cheap oil and derivative products already beginning to pinch consumers and businesses alike, oil is quickly becoming the new Achilles Heel for bulls just looking to get past Greece.

 

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 


Recent articles by Chris Tyler, Optionetics.com


September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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