U.S. stock futures are trading sharply higher to kick-off the second quarter of the year. The gains continue Friday’s rally and signal inverted yield curve fears have been laid to rest for now.
Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.83% and S&P 500 futures are higher by 0.7%. Nasdaq-100 futures have added 0.92%.
Friday’s quarter end run lifted call volume while put demand sank. Specifically, about 17.6 million calls and 13.8 million puts changed hands on the session.
With puts losing steam, the CBOE single-session equity put/call volume ratio dropped to 0.65. At the same time, the 10-day moving average inched higher to 0.62.
Call popularity landed the following three tech stocks atop the most-active options leaderboard. Micron Technology (NASDAQ:MU), Alibaba (NYSE:BABA) and Amazon (NASDAQ:AMZN). Let’s take a closer look:
Micron Technology (MU)
Micron’s 2019 recover received a boost when the semiconductor company reported better-than-expected earnings two weeks ago. The initial surge was stopped dead in its tracks, however, by the descending 200-day moving average. Since then, profit-taking delivered a textbook five-day pullback to its rising trendline and the 50-day moving average. The test of support was pivotal and tested whether or not buyers were willing to defend MU stock’s uptrend into quarter end.
Friday’s 5% rip proved bulls are still in control and with Micron trading another 2.5% higher premarket, this upswing looks like it could return to the $44 resistance zone.
On the options trading front, calls outpaced puts by a slim margin. Activity ran slightly higher than normal coming in at 118% of the average daily volume, with 203,285 total contracts traded. Calls accounted for 56% of the day’s take.
With support confirmed and buyers back in control, uncertainty dissipated on the day. Implied volatility sunk to 40%, placing it at the 11th percentile of its one-year range. Premiums are now pricing in daily moves of $1.05, or 2.5%.
Alibaba (BABA)
Chinese stocks joined in the quarter-end rally, led by heavy hitters like Alibaba. Given the three weeks of chop seen in the stock during the March malaise, Friday’s run was a nice change of pace.
Volume spiked alongside the rally confirming institutions leaned on the buy button all day. The jump carried BABA stock to the upper end of its month-long range, positioning it for an upside breakout. Normally I’d say watch for a break above resistance of $183.50, but it’s unnecessary. With Nasdaq futures jumping out of the gate this morning, BABA is set to open 1.75% higher to $185.65.
The breakout happened while you were sleeping.
On the options trading front, traders came after calls with a vengeance. Activity climbed to 117% of the average daily volume, with 131,484 total contracts traded. 70% of the trading came from call options alone.
Complacency reigns in implied volatility land. The reading ended the day at 29%, which keeps it at the 29th percentile of its one-year range. Premiums are baking in daily moves of $3.30, or 1.8%.
Amazon (AMZN)
Amazon could get a boost today on the heels of Oppenheimer raising its price target to $2,085. Previously, the firm had its target set at $1,975 so it’s not as if this 5.6% bump represents an earth-shattering shift in expectations. Nonetheless, it does give buyers a bullish narrative to choose from if they were looking for something to spur a rally.
Ever since breaking out of its trading range last month, AMZN stock’s price action has been very constructive. Last week’s bout of digestion formed a bull flag that points to higher price. It’s important to watch for price to emerge from the flag before buying. Consider using $1,800 as your line in the sand.
On the options trading front, fireworks were lacking but the slightly above average volume was still enough to put AMZN on the map. Total activity edged higher to 105% of the average daily volume, with 193,461 total contracts traded. Calls added 57% to the sum.
Implied volatility higher fell to 28% on the session which places it at the 35th percentile of its one-year range. Premiums are pricing in daily moves of $31.88, or 1.8%.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.
