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imgWeekly fresh-squeezedmarket analysisand commentary.

Facebook Tanks. Amazon Banks.

February 6th, 2022
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Market Update for the Week Ahead

Welcome back to The Juice everyone, where we glance at the Crypto and Stock markets via alternative methods, such as Options Flow and Social Sentiment. A big reversal was underway on Friday led by Apple earnings, but will it last? Let’s dig into the options market and see what it’s telling us.

Markets - Overview

Market uncertainty remains even more so after some of tech’s earnings were less than stellar while others were exceptional. Tech winners so far were Amazon (AMZN), Apple (AAPL), and Google (GOOGL) and the biggest losers have been Facebook, PayPal, and Netflix. The group of biggest losers were all down over 20% on the post-earnings drop, so what can we make of this? Let’s browse to Friday’s options tape and see what went down.

Amazon (AMZN) traded +14% for the day after reporting a beat on earnings, most of which came from the increased valuation in their Q4 stake in Rivian after an outstanding quarter. Q1 has been different as Rivian’s share price is down 40% YTD so that might be reflected in Q2.

Facebook/Meta platforms put/call ratio was still favorable on the call side even through the reckoning we saw on Friday. For perspective, the company lost over 200 billion in market cap. Zuckerberg did comment on how they are seeing unprecedented competition in the space. This pressure is coming off the back of Apple’s new privacy policies for ad-serving and where user’s eyeballs are going over to [cough] TikTok [cough].

Snap Inc (SNAP) was another massive winner from Friday after reporting their first profitable quarter. Call-buyers swooped in, forcing gamma exposure upwards and pushing the price higher.

The hard times keep coming for PayPal (PYPL) after another poor-quarter forced the share price into a decline of over 25%.

 

Markets - Sectors

HYG, the High-Yield Corporate bond ETF, was by far the most active in Friday’s whipsaw action. Another unusually active name in the bond category was LQD, an investment grade corporate bond ETF. Both of these ETFs have been in a downtrend ever since inflation and interest rate pressures have begun to surface. With this bearish option flow it could be players are expecting to ride this downward momentum while these pressures continue to go forward.

We wanted to go through a custom scan on the option matrix after Amazon had such a huge move, both in share price and in terms of increased nominal valuation.

Peep the largest trade sweeps that were all going on right from the market open. The largest trade of the day was a $56 million dollar block, followed by a slew of trades in the millon-teens, and the rest in the $5-10 million range. Options traded on Amazon are usually fairly large in size due to the nature of the high-priced ticker, but by any standard Friday’s action was absolutely YUGE. Amazon is another one of big-tech that has underperformed over the last 12 months. In fact, it’s 12-month performance is sitting at -6%.

 

Options Scan - Roaring Kitty Calls

Speaking of unusual call option activity, there was a whole lot more action spotted in many of the call-option-specific scans. Here’s the Roaring Kitty Calls summary.

Option volume was off the charts (almost literally) with most strikes showing over 10,000% of the average 10-day volume. It was a feeding frenzy for call-buyers as players tried to not just get in before the momentum took off, but also ride it on the way up. Notable for SNAP is that even after Friday’s 60% moonshot the share price is STILL down 50% since September, 2021. This really puts things into perspective with how badly many names have gone down in just the last few months alone. In our opinion, once this volatility clears and the market gets back on track some of these over-sold names might see a huge bounce to the upside.

 

Options Scan - High Volume Calls

Moving over to another options scan we like to browse is the “stocks only” high volume calls that displays contracts where the executed volume was over 5x the 10-day average. What we’re seeing here was actually an absurd amount of Facebook calls being traded in a full range of strikes. Some of the volume was running at over 1 million percent the 10-day average. It’s rare to see a mega cap stock being down bad worse than yourself on prom night, but does Wall Street really want to bet against the Zuck?

 

Next week - Where do we head next?

We’ve still got a lot of earnings to run through next week. Here’s what we are keeping an eye on:

Peloton (PTON) has been in rough shape over the last 8 months. The company has lost nearly 85% of it’s value while dealing with things such as supply chain issues to hiring freezes to correcting the over-spending. Recent rumors of being acquired by Amazon saw the stock price spike 25% on Friday.

Chipotle (CMG): Chipotle has always been a cash-flow beast. What we’ll be paying attention to on the call is to what management has to say about labor shortages and wages increase. This might reflect in other labor-heavy companies.

Uber (UBER): Uber had one of their best quarters several months ago. We all know prices have increased for using this ride-sharing app, so I’m looking to see what this quarter has in store for us.

Disney (DIS): One thing WallStreetBets has told me is to never bet against the mouse. Disney’s share price has been within a similar range for many months. The focus will be on Disney+ numbers, yet again, as we look for growth in users.

 

DFS Games

That’s all for this week’s the juice. Remember to always keep an eye on unusual options activity as there is always someone who knows something. If you haven’t already check out the Daily Fantasy Stocks games that are starting on Monday, almost $1,000 is being given away! Don’t forget, these games are completely free to enter so go ahead and get your watchlists ready!

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