This Stock is Breaking Down Ahead of Earnings – Time to Buy?

September 13, 2021

Democrats and Taxes

Besides Supply-Chain issues, weather, Fed-tapering, inflation, China tensions, and high valuations, here’s one more risk to throw in the mix that will likely pick up steam over the next 3 weeks. 

Goldman Sach’s David Kostin is warning customers on potential tax increases stemming from the Democrat’s multi-trillion dollar plan:

“Congress plans to raise corporate taxes to fund reconciliation legislation. However, the stock market is only partially pricing an increased tax rate in 2022… The busy legislative calendar in September should lead to increased earnings estimate volatility in the near future.”

In NYC and California, taxes for the highest earners would rise to 61.2% and 59.7%. It's clear that at some point, they stop working right?

Luckily, the government can only take 100% of what you earn. 

And at least they’ll leave your 401k alone. (Unless… nahhh, would they?)

Here are today’s 3 interesting trades… 

UNUSUAL OPTIONS ACTIVITY

1. UBER Continues to Show Strength 

2. Breaking Down Ahead of Earnings... Time to Buy?

3. Smile, it’s Monday’s Meme of the Week!

Let’s get started...


UNUSUAL OPTIONS ACTIVITY UBER

UBER Continues to Show Strength 

UBER Unusual Options Activity 091321

It was just several weeks ago that UBER got some really bad news out of California on their endless fight with unions and drivers looking to be classified as employees. 

The interesting part about that day was how UBER traded up on negative news.

Then last week, Morgan Stanley reiterated UBER as a top pick. They want you to focus more on their Freight business potential instead of their employee classification problems:

“While investors often view Uber Freight separately from the broader Rides and Eats ecosystem, UBER’s presence in freight allows it to provide retailers and manufacturers with a bridge from first mile (Freight) to last mile (Delivery).”

Looking at the chart, it’s pretty easy to spot the big level in UBER:

What Does the UBER Stock Chart Say?

UBER Chart 091321

$39 was the low on the day after the November election. 

It’s being supported there over the last few weeks after this big dump from the mid-$60s.

But a breakdown could see a drop to the mid-$30s.

There was more negative news this morning out of Amsterdam regarding UBER's employee classification legal issues.

Traders tried to break that $39 level right after the open, but UBER held firm... again! 

UBER Active Option Contract to Watch

Unusual Options Activity UBER 091321

During that early morning drop, Put buyers jumped in to try to catch the possible break down through $39.

When that didn’t work there was a rush for this week Calls.

“Strong” stocks trade well on negative news. UBER is giving you notice that the big, long-term buyers find value there.

Maybe Morgan Stanley is right… focus on freight! 


UNUSUAL OPTIONS ACTIVITY NKE

Breaking Down Ahead of Earnings... Time to Buy?

NKE Unusual Options Activity 091321

NKE is just another name being hit by supply-chain concerns. Today, BTIG downgraded the stock to neutral:

“We are downgrading NKE to NEUTRAL from BUY based on work we have done across the supply chain coupled with checks with our retail contacts, all of which point to severe supply chain disruptions emanating from the COVID-driven factory shutdowns in Vietnam that have worsened since the company last reported on June 24th.”

The stock posted great earnings in late June and the stock took off.

What Does the NKE Stock Chart Say?

NKE Chart 091321

They even said that supply-chain issues would last into 2022.

The reality is that Wall Street hears this but they don’t seem to be listening. The BTIG note continues:

“We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for NKE as it is now facing at least two months of virtually no unit production at its Vietnamese factories which accounted for 51% of footwear and 30% of apparel units (43% of total units) last year.”

There is a huge $20 gap that the stock needs to digest. 

And as you can see, the stock is having trouble under the 50dma. Also, notice that the 50-200dma spread is quite wide as well.

NKE Active Option Contract to Watch

Unusual Options Activity NKE 091321

Someone is all over this name. On the move higher last week there were buyers of puts. 

Today, those puts were rolled down to the $160s from the $165s. It’s interesting that this buyer is pressing this week’s options ahead of earnings next week.

If you have no product, you have no sales.

Supply-chain issues are a real problem.

Throw in logistic issues and the holiday season might be in trouble.


UNUSUAL OPTIONS ACTIVITY SDC

Smile, it’s Monday’s Meme of the Week!

SDC Unusual Options Activity 091321

I thought I would throw out a meme stock I see this morning.

No news.

No earnings.

Just Call buying. Lots of call buying. 

The stock has gotten crushed over the last 6 months.

What Does the SDC Stock Chart Say?

SDC Chart 091321

But notice those 3 days I highlighted on the chart.

Each day saw some serious stock volume.

And if you look closely, all 3 of those days traded right around $5.25. 

There’s some Unusual Options Activity in SDC today.

SDC Active Option Contract to Watch

Unusual Options Activity SDC 091321

This week and next week September Calls are active on the buy side. The IV is up significantly, which shows some eagerness.  

SDC has been on the Unusual Options Activity charts for 8 out of the last 12 days. (Left-column) Impressive.

Also, keep in mind that if SDC holds these levels today, then it will be the first time in 3 tries that it didn’t reverse to close near its lows.

That would be noticeable change of pattern. Stay tuned!

Sign up for the Options Trading Newsletter via email and receive a FREE 7-day Options Course.

Now go make some money!

Best,
Felix

THIS IS HOW THE TOP 1% TRADE OPTIONS

The Most Controversial Options Video

that the Experts Don't Want You to See!

Voted Top Presenter at the Benzinga Options Conference

Options Trading Tutorial - The Greeks Don't Matter