After enduring their worst first week of the year ever, stocks appear to be headed higher heading into the open this morning. Bargain hunting appears to be the theme, as Chinese stocks closed down 5% across the board, while oil prices remain weak. In premarket trading, U.S. stock futures on the Nasdaq Composite were last seen higher by 0.40%, with S&P 500 futures up 0.48%, and the Dow Jones Industrial Average futures up 0.36%.
Equity options volume was average on Friday, as traders backed off a bit amid uncertainty heading into the weekend. Over on the CBOE, the single-session equity put/call volume ratio hit yet another two-week high of 0.93, while the 10-day moving average edged higher to 0.76.
Turning to news driving equity option activity, Apple Inc. (NASDAQ:AAPL) continues to be flooded with bearish analyst activity. Meanwhile, both Netflix, Inc. (NASDAQ:NFLX) and Alibaba Group Holding Ltd (NYSE:BABA) were reiterated with “buy” ratings.
Apple Inc. (AAPL)
Apple stock has been the talk of the brokerage community during these past few months, with waning demand of the company’s flagship iPhone dominating the discussion. The narrative continued on Friday, with Rosenblatt downgrading the shares to “neutral” from “buy” with a $102 price target. Furthermore, while BMO Capital reiterated its “outperform” rating, the brokerage lowered its fiscal 2016-17 earnings estimates for Apple, citing weak iPhone sales. Finally, Mizuho Securities downgraded AAPL to “neutral” from “buy” last night for the same reasons, lowering its price target to $120 from $125.
Options activity also continued its shift toward the bearish end of the spectrum on Friday. Overall volume came in at 1.9 million contracts, but calls only managed to eek out 51% of the day’s total activity. Turning to January options open interest, traders should keep an eye on the $100 strike this week, as some 82,000 calls and 74,000 puts are currently open at this overhead strike.
AAPL is looking to bounce back a bit this morning, with the shares up 0.88% at $97.81 at last check.
Netflix, Inc. (NFLX)
NFLX is another stock that has attracted a wealth of negativity on Wall Street during the past month. However, Netflix overshadowed spending concerns by recently announcing plans to go (nearly) global with its online streaming service.
Netflix is slated to enter the earnings confessional on Jan. 19, and MKM Partners reiterated NFLX stock with a “buy” rating and a $145 price target heading into the event. Netflix is currently expected to post a profit of 2 cents per share on revenue of $1.83 billion, though subscriber numbers may be an even bigger driver than the bottom-line report.
In options activity, NFLX saw 390,964 contracts change hands on Friday, with calls snapping up 54% of the day’s take. Levels to watch this week include the Jan $110 strike, where peak put OI of 13,737 contracts currently reside, and the Jan $115 and $115.71 strikes, which are collectively home to 5,614 contracts.
Alibaba Group Holding Ltd (BABA)
MKM Partners stepped up on Friday to remind investors that not all Chinese stocks are bad investments. The brokerage firm reiterated its “buy” rating on BABA stock, though the news appeared to have little impact, as the stock closed lower by 2.7%. Alibaba also announced on Friday that it has struck a deal with the NFL to broadcast games, highlights and weekly programming in China.
Options activity was brisk on BABA on Friday, with 267,620 contracts changing hands. Furthermore, calls were the most popular investment vehicle, accounting for 61% of the day’s take. Traders will want to keep a close eye on action in the $70 region today, as 23,210 put contracts and 8,773 call contracts currently reside at this strike in the January series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
