A Massive Earnings Season Begins This Week (July 17-July 21)
July 17-July 21, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The markets continued to breakout last week but closed slightly down as SPY touched $450. These next few weeks are going to be crucial in determining on how the markets will continue this $10T rally with a huge earnings season coming up.
With what can be considered one of the most important earnings seasons of the year coming up, wall street is taking a look at how companies have been doing coming out of last year’s slump. Firms are expecting to post a 9% drop in overall profits.
The AI boom has really driven the stock market this year, with huge growth in names line Nvidia, AI, and Microsoft. The questions for this week now become: has the AI bet on efficiency paid off and what new companies are going to start using AI in order to improve their profits and efficiency. Micron said they are expecting a slowdown in the personal computer markets. A slowdown in the markets can be caused by the Fed doing more than one more 25bps rate hike before a pause. In European companies, currency movements have wall street expecting further profit declines than in US names.
After four years of negotiation, United Airlines has come to a labor deal with its employees with the benefits being backed by labor strength and rebounding revenues which is good news for the whole industry. They are reporting earnings on Wednesday as well.
On Thursday, ARK Invest led by Cathie Wood is holding their fund webinar and we will likely hear what her new favorite names are. She has recently sold Coinbase stock and bought into Robinhood, so those names should be on watch this week as well.
Last week, Jamie Dimon of JP Morgan Chase stated that ‘…the consumer is in good shape” but the overall sentiment from the bank earnings last Friday was that, although there may be a coming slowdown, the economy continues to perform better than expected.
#1) Earnings for larger companies start this week, with the most notable names being Tesla, Netflix, and banks like Morgan Stanley and BofA. Netflix recently cracked down on password sharing which may have driven an increase in users. As usual, I don’t trade earnings because of the gambling like nature surrounding them, but if you do make sure to know the risks of trading such binary events.
#2) On Monday, watch Microsoft and Activision for news about their merger, and The Federal Reserve Bank of New York will release the manufacturing data at 8:30 AM.
#3) On Tuesday, Microsoft has a large keynote session and retail sales data will be released at 8:30 AM.
#4) On Thursday, crude oil futures will expire which may lead to extra volatility. ARK invest is also holding their investors day that afternoon.
#5) On Friday, the Nasdaq 100 is rebalancing in order to reduce the effect of the largest companies in the index, including Apple, Nvidia, Meta, and more.
The S&P 500 ($SPX index) is cooling off after a strong run.
My key breaks are $4522 for bulls and $4492 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
EV stocks continued to breakout and Tesla is right about to make the next leg up, but I do think earnings will be the catalyst that really drives this one.
Apple just broke the $3T market cap and is in a pennant here. After a huge run for the first half of 2023, this may have a bit of a cool off period here, or it may go for the next leg up, but it’s all dependent on how it breaks out of this pennant. Wouldn’t trade it and let premiums cool off until we get a direction.
Lyft is retesting this breakout with a huge gap to fill above with call flow. I like this as long as it doesn’t close under $10.80.
In terms of insider trades, ASAN is the only notable buy to me. The CEO loves buying this stock on dips.
High Short Interest Stocks (MarketWatch)
#1 - ALLO 50% SI
#2 - CVNA 49% SI
#3 - NVAX 42% SI
#4- LCID 42% SI
#5 - BYND 41% SI
Top Options Sweeps on Friday
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)