Amazon, Alphabet and Intel... Oh my!!!

Tesla reported a blow out quarter and I believe it should be trading closer to $420/share now, but we



have too much Geo-Political risk the market is dealing with as they have proven relevant on earnings calls whether it is stated or not. Amazon also reported its best quarter ever Thursday night and went down 10% due to a miss on the revenue. Alphabet reported earnings that were near Apple's last quarter's numbers, but also missed on revenue versus expectations. I think it is crazy to think that these companies should be punished due to a miss that doesn't really account for much since they are still growing and increasing their earnings per share.

Intel had a great earnings report which was expected since AMD did not. I don't know if it matters as we are facing increasing interest rates along with higher import cost due to tariffs. We are also on the edge of a mid term election where Democrats are expected to play a bigger role in the House of Representatives. If that happens, expect more time wasted as they will try to reverse the tax cuts instead of working on new things. The tax cut won't be reversed because President of Trump would not sign off on it and the Senate won't vote for a change either. What it does mean is bigger tax refunds for most families in the United States which will spur more vehicle and technology purchases. I believe Ford and Tesla are prime to explode to the upside for 2019.

Until then I think we may experience a little more downside before the market regains its feet and takes off to the upside. It feels similar to earlier in the year however the decline that started in late January was started by Amazon and Alphabet missing earnings. As they started moving up, we got the tariff news and moved everything back down. I think we are near the bottom of the market as the whole picture changes once the tariffs disappear regardless if the Federal Reserve slows down with the rate hikes or not.

Next week we will hear from Apple, Facebook and all of the other important companies that didn't report this week. I would expect to see everything to move up next week and even faster for the remainder of the year.

Turmoil to Profit in the Market... and Tesla

Everything opened lower this morning with the exception to Verizon and McDonald's who reported their third quarter earnings and were awesome. The huge drop was a carry over from the down Asian and European Markets. From open, everything went up for the first 20 minutes before retesting the downside. Most stocks dipped slightly lower than where they opened, but once they hit that retest point, everything went up.

You certainly could have profited by buying anything except Catepiller and profited today, but you would have been best to wait for that retest of the bottom. Buying Call Options on Apple and Netflix were very good to profit especially if you held them until the end of the day. Alphabet (GOOGL) and Amazon had great movement, but because they report earnings on Thursday, their options are too expensive to mess with.

Tesla options got very expensive from open because the company has elected to move up their earnings report to Wednesday which is a week earlier than scheduled and 2 weeks before normal. Obviously they must have good news to move up the earnings report like this as we expect them to produce the company's first profitable quarter in a long time. There was news today that notable short sellers have gone long on Tesla stating their new Model 3 is going to put them over the top.

I am very disappointed because I had 2 weekly Call Options with a 260 strike price that I closed out yesterday afternoon. Those 2 options would have been worth 3700 each by the end of Tuesday. If Tesla produces a huge profit, I would expect the company to trade up to 420 by the end of the week.

Something interesting happened today when Verizon reported earnings. Most stocks that move up before earnings announcement typically sell off the next day even when they beat their earnings report. Verizon has been steadily going up for the past month. After the earnings announcement, not only did the stock move up, but it continued going higher after the market opened. That has not happened since July of 2017. Since the 2nd quarter earnings announcement of 2017, every report has beat expectations but the stock reversed it's premarket gains to actually trade lower.

Apple was the first company to have this kind of positive stock movement after beating their numbers on the second quarter of 2018. McDonald's today had similar movement. This is completely different from Netflix which traded down every day since their earnings announcement until today. This trend appears to be reversing with bell weather companies like Apple, Verizon and McDonld's. On Wednesday before the market opens we will get Boeing and AT&T earnings. Boeing will be is expected to be awesome and AT&T won't. I would expect the market to be mixed on Wednesday with some late day upward movement.

Upward movement is expected when Amazon and Alphabet report earnings this week. Both companies are around 200 points off their all time high that was established 3 months ago. What will be interesting is if they move up after earnings, open the following day higher and if they can keep those gains and move higher to get closer to their all time highs. FANG companies tend to sell off after reaching a huge increase. They were making new highs the past couple of quarters post earnings, so this feels different. 

Separation of FANG

Netflix had a great earnings report Tuesday afternoon and it shot up after the Bell on Tuesday and went straight down after that. It opened Wednesday morning at $380, dipped down to 356 before finishing around 365. It went further down on Thursday and even further on Friday as Disney hit a new 52 week high that is near it's all time high based on belief that Disney will take market share from Netflix moving forward. Alphabet and Amazon traded down but for the most part Alphabet and Facebook finished the week flat while Netflix and Amazon experienced more negative effects due to their high valuation.

Trading Alphabet (GOOGL) options were interesting on Friday as it looked very similar to the prior Friday. Alphabet opened up and went up to 1121 by 10:05am before going down to 1098. It went back up to 1110 and back down to 1097 before finishing the day at 1105. It didn't have the big late day run like last Friday and is why I say that you can't trade expecting a huge Friday afternoon movement or you will get burned more times than not.

Options will be very expensive for Amazon and Alphabet because they report earnings after the bell on Thursday. Like Netflix  their earnings should be great and they will go up huge and sell off the whole day on Friday.

I did take advantage of the sold off Friday position of Tesla to buy a 360 Call for next week when it was at 354. I hope to get a nice move up on Monday or I will be selling quickly.

On Tuesday Verizon will report third quarter earnings before the market opens and as usual it will be great and benefit from not having any tariff exposure or declining media business because they are not trying to be in a low profit market like AT&T which reports Wednesday. It would be nice if AT&T has something good to report. Either way Verizon should be up more which is never the case as AT&T drags Verizon down with it. I would like to see Verizon and AT&T to act like PayPal and Ebay as PayPal had great earnings report and Ebay went in the opposite direction on PayPal highs.

Boeing reports earnings Wednesday morning and they should be excellent as long as they don't have anything to say about tariffs. As with almost every company that has reported earnings, I find that if they have great earnings and go up big, they will sell off that next trading session. If the market does not like the earnings, the shares will go further down in the next couple of market sessions. Either way it appears best to buy Put options in the first couple of minutes after the market opens after earnings are reported. Based on that stance it sounds like we are in a bear market. I don't believe that is the case as positive market movement is based on less than 30 days in a year. That is what history says  but the down days extend into multiple sessions while positive movement occurs in a day and doesn't appear to move as much as the sum of the down days. 

Netflix and Chilled, Interest Rates and Market Correction

Netflix reported a blow out 3rd quarter Tuesday afternoon. The stock rose as high as $400 before

settling around $385 and then opened Wednesday morning at $380. From there it went down along with FANG. Facebook, Amazon, and Alphabet found a bottom earlier than Netflix. Netflix found it's bottom around 355 before moving up for the afternoon. I like to see if that number will hold, but so far on Thursday is barely hanging on. Alphabet bottomed at 1115 which should be a key point to pay attention to on Thursday.

Today Alphabet opened higher at 1130 and went straight down to 1114 before bouncing up and then retesting that level at which I bought Call Options and it didn't hold as it went down to 1110. Much of the downward movement in stocks is due to the Federal Reserve minutes noting they still expect to raise interest rates 3 more times next year in addition to again in December. Rising interest rates is what Trump expects will kill the economy and he is right.

Higher interest rates cost all businesses more. Businesses finance expansion with the issuance of debt and small businesses may use debt to help with daily cash flow. Start up businesses may utilize debt to help establish themselves. Consumers use loans to purchase vehicles, homes and luxury items. If the businesses are being squeezed and the consumers have less desire to purchase higher end items, everyone loses, not just the housing sector.

The housing sector has extra constrains between higher material cost along with higher rates consumers have to pay for the mortgage loans. I believe the ultimate problem is the housing sector got fat and greedy from low interest rates for so long. Because interest rates were so low, people wanted larger houses that are larger than what they actually need. Where are they building homes for the average family? It isn't in Orlando, Florida.

Moving forward, Americans are going to have some of the largest tax refunds at the beginning of 2019. Housing may benefit some but with higher interest rates, not as much that will make a difference for the long term. People buy cars when they get big tax refunds regardless of the interest rates so I think Ford is positioning themselves to be the best along with Tesla. I think with Ford and Tesla at their 52 week lows they are a value and a growth buy for 2019 and investors will be happy by August of 2019.

Friday's Sick Market Movement

After going down sharply on Wednesday and further on Thursday, the markets opened higher on
Friday. The peak came quickly and the market reversed almost all of the gains by 1pm when they reversed to go higher. JP Morgan and other banks reported before the market open and the big banks beat their earnings estimates. JP Morgan opened higher above 110 and sold off below Thursdays low to break under 106 before bouncing to go higher after 2pm. I expected this as it appears to be a common theme with JP Morgan.

There are more bank earnings in the following week as we will hear from Bank of America and Goldman Sachs. The difference is JP Morgan will move up after open and sell off for most of the day. I would expect it to retest the low from Friday by Wednesday. On the right is my chart from Friday on JP Morgan. I did not expect to see it fall as far as it did and would have taken profits early and been happy. I don't know why I didn't follow through with this trade.

Alphabet (GOOGL) closed on Thursday at 1090 and opened Friday at 1119. It peaked early to 1122 and moved down from there. In past Friday, when it moves down, it doesn't appear to change directions to move back up. Friday was similar to the prior Friday when it moved down and changed direction at 1pm. I did buy a Put Option, but at the wrong time. I
keep telling myself that I need to wait for the retest of a lower upward movement before buying the Put. If I had, I could have tripled my profit. Instead I bought too early and sold too late to suffer a slight loss which obviously is not a profit.

I did draw up a chart showing the upward movement for the last couple of hours of the day, but I would not recommend that as it is too risky trading options on the day of expiration. It might be a good time to get options for the next week. I would not recommend holding options for the next week as I expect a retest of the low before moving up. That is exactly what happened as Alphabet moved down to 1099 before moving back up to 1120 on Monday. It did fall off after coming back up to 1120 which looks more like another double top to signal more downward movement.

I think more downward movement might be coming very soon as Netflix reports on Tuesday afternoon. It was just announced a few days ago that Netflix is not bringing back Iron Fist for a 3rd season after ending the 2nd with a cliff hanger. Last quarter Netflix dropped hard after not increasing subscribers as much as the market expected. I think that might continue as Netflix recently stopped Apple from taking a share of subscription revenue by removing the subscription opportunity from the Apple Store. For users that were paying for Netflix through Apple, I am sure it is not that big of a deal to switch over to pay Netflix directly. The main question is how long will it take for those subscribers to change over. I think their revenue will increase for the quarter, but subscriber growth will not occur and force the market to try to sell off Netflix again. When Netflix sells off, it takes Facebook, Amazon, and Alphabet with it.

After Netflix earnings, it will either go up or go down. If it opens up on Wednesday, I would expect to see an early peak followed by a sell half of the difference. If it opens down, I would expect more downside with a reverse on Thursday from a much lower base. Therefore, I would like to buy a Put Option on Netflix Wednesday morning regardless of where it opens.

Tesla or Bust

Elon Musk of Tesla makes for some interesting news. Last Thursday after the market closed, the SEC had a conference that they were filing a lawsuit against Elon Musk for market manipulation with his Tweet on August 7th when he stated that he is considering taking the company private at $420/share. From that Tweet the stock shot up from 340 to 380 that afternoon. I said it when it happened that it doesn't make sense and he will have legal problems that will probably include jail time if it doesn't go through.

A couple of weeks later Musk Tweeted that he would not take the company private because so many people would prefer he did not. The stock went down to 252 and bounced to make it to 318. Once the SEC made there announcement, Tesla's stock fell hard after hours and finished last Friday at 362. We learned that the SEC offered a settlement to Musk who refused it. Over the weekend we learned that Musk and Tesla made the settlement deal and the stock erased Friday's drop completely.

After erasing Friday's drop, Tuesday Tesla announced their delivery numbers which were a huge increase from past performance. Tesla's stock moved up at open and moved down for the rest of the day. Then today we found that Musk threatened the board not to make the deal or he would quit. Tesla's stock has continued to move down on Wednesday and bottomed for the day around 292.

What we have learned is that when Tesla is down real low on Friday, buy a Call Option for the next week and you will be happy by Monday afternoon. Next up for Tesla will be their earnings report. If they turned a profit in the third quarter of 2018, we might see Tesla hit that $420/share mark.