Weekender For 4/30
1. Market Summary
Meta Earnings Pick Up Where Microsoft Left Off
- Meta earnings pick up where Microsoft left off, indices surge.
- Hot Personal Consumption Expenditures (PCE) inside Q1 gross domestic product (GDP) rattles stocks but does not stall the move.
- Weaker Q1 GDP, rising PCE spells stagflation.
- Fed set to hike rates next week as the Q1 GDP PCE provides cover.
- S&P 500 and DJ30 surge, continuing solid technical action.
- Nasdaq, Nasdaq 100 have a key test ahead as PHLX Semiconductor Sector (SOX), S&P400, Russell 2000 and DJ20 still lag.
- Amazon’s earnings initially jump the stock higher, but its Amazon Web Services component plunges, causing afterhours gains to evaporate.
- Will Friday March PCE combine with the Amazon disappointment to stall the rebound into the weekend?
Whereas the Wednesday action was pensive following the Microsoft and Alphabet earnings — after all, much more was to come — there was no hesitation Thursday. Okay, chips were sluggish again, but with the relentless onslaught from the Nasdaq twins, every index was positive whether it was early or a latecomer to the upside.
NOTE: The figures and information above are from the 4/27 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 4/26 report.
2. Targets Hit
Technical Trader:
Until Friday, when techs surged after the Meta earnings, much of the action was defensive. Defensive often means slower moves, but when many sectors struggle, defensive can be good. General Mills, Inc. (NYSE: GIS) formed a good pattern from December 2022 to late March 2023 and then broke higher in early April.
We were watching food as one of those defensive areas and GIS’s pattern was at the top of our radar list. When it broke higher April 3, clearing a week-long lateral move, that was the entry signal. We issued the alert to buy June $85 call options trading at $3.40 on the ask with the stock trading $85.71.
The nice thing about this play is the stock did not have to make a big move into new high territory to make us some money. That said, GIS makes cereal, and how is cereal made? Grinding the grain. GIS applies that to its stock moves as well.
Over the next three weeks, GIS ground higher up the 10-day exponential moving average (EMA). This past week, the more defensive stocks, e.g. food and personal products, popped a bit more. GIS moved up to the December 2022 peak and then faded the next sessions, Wednesday.
With the slow grind higher we opted to take half the gains. We issued an alert to sell half the options for $4.40 and a decent 29% gain. GIS still looks good, and we will see if that slow grind higher starts cooking and gives us a better 50% gain.
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3. Covered Call Options Play
Community Health Systems Inc. (NYSE: CYH) — Community Health Systems Inc. is currently trading at $5.86. The June 16 $6 calls (CYH20230616C00006000) are currently trading at $0.55. That provides a return of about 15% if CYH is above $6 by the expiration.
