Markets closed up over 1% yesterday, as fears over the Brexit vote subsided. Futures were even ramping up in the after hour session in anticipation of Britain voting to ‘remain’… that was until first poll numbers started trickling in after 8pm. At first it was a tight race, but as the night progressed, it became more obvious that the ‘leave’ vote was going to win. Markets tumbled around the globe, and U.S. futures triggers a limit-down at midnight, with S&P futures a tad under 2000. They have recovered a bit but looks like markets will have a gap down open of at least 3-4% to the downside. Asia markets closed in the red overnight, with the Nikkei off over 7.92%. This morning it’s a bloodbath in Europe with the DAX off ver 7% and the FTSE down over 11%. The Pound sold off to 30 year lows, and Gold is soaring, up over 5% and was up nearly 10% overnight. The US dollar is stronger, Treasuries are higher, while Oil is selling off.
The Brexit is here and it is not pretty. Seems many Brits voted with their heart and will now be stuck with the consequences of that vote with many short and long-term implications for the UK, Europe, and the Global economy. It has also raised fears of other countries looking to exit the Euro through their own votes like Italy, Norway, Spain, and others. To sum it up, there will be plenty of market uncertainty around this for sometime.
Ironically enough, this was one of my least active weeks in recent memory. Premiums were elevated and did not make sense to try and trade too much ahead of this. I added some GOOGL puts yesterday on the price target downgrade and the fact that it broke some support levels. It traded to $700 before bouncing where i was able to lock some in for a loss. Of course in hindsight, should have held them through today.
I also added some longer-term SAGE calls, think that stock heads over $35 in the coming weeks regardless of the market turmoil.
I am still holding TZA $43 and FAZ $40 calls from last week. The FAZ calls should open up nicely, will look to close then out at the open.
When the market gaps down like this, expect huge Bid x Ask spreads on options. The first 15 minutes will be tough, and almost make sense not to try and chase too much - even if you pick the right direction, the premiums will likely lose value quicker from the volatility crush then from the stocks going your way. On the other hand, if you are holding puts, it is a great time to try and put a highball offer and hope to get filled.
I think this vote changes things quite a bit in the Eurozone, and could be a catalyst for market weakness into next week. Will be watching the $202.50 and $200 areas on the SPY for support - if it holds there I will try for a few lotto weekly calls today for a small bounce. At the same time, I will be looking for further OTM plays for more downside via TZA and FAZ calls:
Don’t plan on locking in my SODA, NVRO, RH, SCTY, SAGE, DATA, or SHLD positions here today - but of course could change depending on how the market reacts today. Stay tuned to the chatroom and private twitter for updates.
One of the few days this will not matter much, but here are the analyst changes of note for today anyway:
Equinix shares undervalued at current levels, says William Blair
William Blair analyst Jim Breen noted that at the company's analyst day meeting yesterday, Equinix gave targets to grow revenue at 10%, EBITDA at 12%, AFFO at 14%, and dividends at 15% annually from 2016 to 2020. Equinix shares are undervalued at current levels, given the company's geographic diversity, colocation market leadership, and high exposure to the rapidly growing public cloud segment, said Breen, who keeps an Outperform rating on the stock
Roth Capital positive on pending acquisition of AS&E by OSI Systems
Roth Capital analyst Jeff Martin believes OSI Systems' (OSIS) pending acquisition of American Science & Engineering (ASEI) brings scale with margin and earnings accretion given "significant" cost synergies. The analyst expects AS&E's product portfolio to enhance OSI Systems' position in the cargo and vehicle inspection market. Martin reiterates a Buy rating and $57 price target on OSI Systems' shares
Accenture reported strong Q3 results, says Argus
Argus believes that Accenture reported strong Q3 results, and the firm expects the company to continue to benefit from increasing demand going forward. It reiterates a Buy rating on the shares
JPMorgan still skeptical of GE targets following Digital investor day
JPMorgan analyst C. Stephen Tusa, Jr. said he came away from GE's Digital Investor day meeting with little to change his view. On the positive side, the company gave a well presented vision and showed alignment across the organization. However, Tusa said he can't see how management's expectation for a business to grow from "less than $50M to $4B in essentially two years can be viewed as realistic." The analyst, who views data and analytics as a "business that remains too small to matter" at this point for GE, keeps an Underweight rating on the stock, as he views the company's earnings and free cash flow as remaining weak
Citi says meeting with Chairman increased confidence in Mobileye
Citi analyst Itay Michaeli said that after hosting a meeting with Mobileye senior management, including co-founder, CTO and Chairman Amnon Shashua, he came about with added confidence in his Buy thesis on the stock. Mobileye expects that an automaker will announce the first volume-production autonomous vehicle program using its EyeQ5 chip, for the 2021 timeframe, in the coming weeks, according to Michaeli. Such an announcement might further accelerate the industry's autonomous "race" and begin a standardization push that will be positive for Mobileye, the analyst added. The firm keeps a $66 price target on Mobileye shares
Valeant 2016 estimates lowered below guidance at Morgan Stanley
Morgan Stanley analysts led by David Risinger lowered Valeant estimates saying they over-estimated earnings and under-estimated SG&A. The analyst lowered Q2 earnings estimate to $1.50 from $1.68, versus consensus of $1.59, due to higher SG&A from ongoing legal fees, Board expenses, and ad hoc committee costs. Risinger lowered 2016 to $6.40, below management's low end guidance range of $6.60 based on full year SG&A as a percentage of sales of 27.7% versus guidance of approximately 26%. Risinger rates Valeant an Equal Weight with a $33 price target
Currency may be biggest Brexit impact on biotech, says Piper Jaffray
Piper Jaffray analyst Joshua Schimmer said the implications of Brexit on biotech companies are unclear, though he added that currency may be the biggest impact. Alexion (ALXN) BioMarin (BMRN) and Gilead (GILD) are exposed to a greater extent to foreign exchange impacts, Celgene (CELG) is "in the middle" of the group and Biogen (BIIB) and Amgen (AMGN) are less exposed, Schimmer tells investors. Additionally, shipping product in Europe may become more complex and it is unknown whether GDP changes as a result of this will lead to a new set of IPAB calculations, the analyst added
Ulta Beauty estimates raised following checks at Piper Jaffray
Piper Jaffray analyst Stephanie Wissink raised her estimates and price target for Ulta Beauty following vendor checks that point to broad based strength and ongoing share capture by the company. Wissink increased her price target on Ulta shares to $250 from $235 and keeps an Overweight rating on the stock
Biotech stocks 'somewhat insulated' from uncertainty, says RBC Capital
RBC Capital says that biotech stocks are "somewhat insulated" from the economic uncertainty caused by Brexit. RBC says that since biotech companies provide life-saving drugs, their orders from the EU should not be significantly affected by Brexit, and biotech is generally less sensitive to economic fluctuations, while biotech companies generally have low exposure to the U.K. It identifies Celgene (CELG) as its favorite biotech name to buy on weakness, saying that the stock will likely rebound once the market recovers. Given Amgen's (AMGN) low multiple and low exposure to the EU, it's one of the more defensive names in the sector, while Gilead's (GILD) low P/E ratio and "huge buybacks" provide support for that stock, RBC stated
TripAdvisor influence in hotel research, bookings growing, says Piper Jaffray
Piper Jaffray analyst Michael Olson reports that the firm's survey of 1,500 online travel consumers showed that TripAdvisor is gaining influence in both hotel research and hotel reservations, which he reads as a positive sign that the company's Instant Book platform is becoming increasingly useful to hotel shoppers and beginning to change consumer behavior. The firm keeps an Overweight rating and $95 price target on TripAdvisor shares
And here is what I am watching today:
|
Stock Ticker |
Call/Put |
Strike |
Expiration |
Closing Price |
Possible Entry Price |
|
TZA |
CALL |
$47.00 |
July |
.26 x .41 |
0.50 |
|
FAZ |
CALL |
$50.00 |
July |
.24 x .43 |
0.50 |
|
YANG |
CALL |
$27.00 |
July |
.20 x .65 |
0.45 |
Lets have a Great Day!
-JB