Tuesday’s Vital Data: Apple, AT&T and United States Steel

Options activity provides a look at expectations for AAPL, T and X stock

U.S. stock futures are trading lower this morning as Wall Street gears up for a speech from Federal Reserve Chairman Jerome Powell on Wednesday before the House Financial Services Committee.

Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.38%, and S&P 500 futures are lower by 0.34%. Nasdaq-100 futures have shed 0.34%.

In the options pits, put volume sank like a stone yesterday despite the market pullback. This suggests fear is being kept at bay and the selling we’re seeing is garden variety profit-taking. By day’s end, 16.7 million calls and just 12.3 million puts changed hands on the session.

The summer doldrums continue to produce lackluster readings in the CBOE single-session equity put/call volume ratio. It inched higher to 0.63, while the 10-day moving average climbed to 0.62. With both measures in the center of their three-month range, it leaves little to discuss regarding fear or complacency.

Options trading ballooned in the following three stocks. AT&T (NYSE:T) was flooded with activity ahead of today’s dividend payment. Apple (NASDAQ:AAPL) shares slipped after being downgraded on poor iPhone sales. Finally, United States Steel (NYSE:X) suffered a high-volume drop that broke major support.

Let’s take a closer look:

Tuesday's Vital Data: Apple, AT&T and United States Steel, options trading

AT&T (T)

Dividend plays took the top three spots of the leaderboard, but I’ve chosen to focus on AT&T because of its compelling price chart. The telecom titan has put together quite the one-month rally. The 8% jump has T stock now testing a key resistance zone at $34.30.

With its ceiling looming large and overbought readings flashing, I suggest caution at chasing the shares here. A pullback or pause will provide lower-risk entries. Remember, AT&T is a stodgy dividend payer, not some high-flying tech stock prone to ignore overstretched readings.

The real reason for AT&T’s explosion in options trading is today’s ex-dividend date. For holders of record, a 51 cent cash payment will be doled out. Institutions used calls to control the stock for long enough to capture the dividend. Based on its closing price of $34.25, the quarterly dividend payments result in an annual yield of 5.96%.

Implied volatility remains at the low end of its one-year range — the 20th percentile. So, if you’re inclined to play options here, buying them is the way to go.

Apple (AAPL)

Apple shares suffered a setback Monday, falling as much as 2.8% during the trading session. The cause for the sudden slip was a downgrade by Rosenblatt Securities analyst Jun Zhang from Neutral to Sell. Zhang pointed toward worse-than-expected new iPhone sales and a slowdown period for Apple’s business as reasons for his bearishness.

From a technical analysis view, the price drop did little to change the uptrend that has defined AAPL stock since early June. It remains above a rising 20-day moving average, and buyers emerged to defend their turf yesterday. Watch the $195 support zone moving forward. A breach of that would reverse the uptrend sending warning signs to chart followers everywhere.

On the options trading front, the downgrade and accompanying down gap lit a fire under put demand. Total activity swelled to 139% of the average daily volume, with 532,795 contracts traded. Puts claimed 54% of the session’s sum.

Implied volatility popped to 29% placing it at the 35th percentile of its one-year range. Premiums are now pricing in daily moves of $3.67 or 1.8%.

United States Steel (X)

United States Steel shares officially ended their recovery attempt on Monday. The one-day, 7.9% beatdown slammed X stock back below its 50-day and 20-day moving averages and signaled the beginning of its next descent. If the history of its trend is any indication, a revisit of last month’s lows ($11.67) is a strong possibility.

Volume surged alongside the descent creating an ominous-looking distribution day. Both its short-term ascending trendline and horizontal support from a prior pivot were breached, adding urgency to the decline. Until the stock can return to the north side of its 50-day moving average, steer clear of bullish trades.

On the options trading front, surprisingly calls outpaced puts on the session. Total activity ramped to 152% of the average daily volume, with 78,654 contracts changing hands. Calls accounted for 53% of the tally.

Implied volatility shot through the roof to end at 63%. That places it at the 74th percentile of its one-year range, suggesting that premiums are ripe for the selling.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2019/07/tuesdays-vital-data-apple-att-and-united-states-steel/.

©2019 InvestorPlace Media, LLC