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.
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