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WFC

THE WEEK AHEAD: DAL, C, JPM, WFC EARNINGS; EWZ, TLT/TBTAlthough the earnings season has already kicked off modestly, a bevvy of financials announce next week: C, JPM, and WFC (all on Friday). I generally don't play these underlyings for volatility contraction around earnings primarily because the implied volatility just doesn't ramp up to the degree I'd like to see for a play. I thought I'd mention them here since there will be possible broad sector (XLF) impact depending on how these earnings go -- i.e., there could be a play that develops in one of these underlyings post-announcement or in the sector as a whole that may be worth playing. Other Earnings: DAL (rank 41/30-day 32) announces earnings on Thursday before market open. The metrics don't look promising here for a directionally neutral premium selling play, but I could see going for something bullish if earnings experience engine failure and crash into the 52-week low around 48 and implied volatility remains high such that a bullish assumption play would be productive (e.g., short puts, Jade Lizard, etc.). Although there are some other single names that are "ripe" for a volatility contraction play right here (TSLA (earnings in 31) comes to mind), my general tendency is to resist the urge to put plays on in single name with earnings announcements that are near the monthly and instead wait until the eve of the announcement. With a rank of 99 and implied of >100%, though, it's understandably tough to sit on one's hands and wait. On the Exchange-Trade Fund Front: Brazil is voting today, so it's likely that you're too late to get into a volatility contraction play that may evolve after the results are finalized (the time to have put that play on was last week). That being said, it's also possible that EWZ gets even more volatile depending on the outcome, even though implied volatility is at the top of its 52-week range at 56.2%. The financial media has returned to covering 10-year T note yield hand-wringing and/or the spiking of bond yields in general as a general, explanatory theme of why the broad market gave some up last week. TLT broke through long-term support at 116 last week, cratering to 113. I was previously shorting TLT from the 122 level via put diagonals, but it appears that play may have temporarily played out in the absence of some risk-off event that drives treasuries back up. I will continue to short TLT on retrace, but there is little that sticks out to me in terms of horizontal resistance other than 122 and 116, and I'm hesitant to short from 116, since it literally just broke that level "seconds ago" in the scheme of things.
AMEX:XLF
by NaughtyPines
5
JPM: Top of range reversal to $106The yield curve is flattening in hurry with the Turkey crisis and that is baaad for US banks. JPM is reversing off the top of a well established channel with MACD confirmation. Downside target of $106 gives a potential 7% return. Do note I am not advocating a straight line decline to the bottom of the range. Moves within channels are generally ABCD formations so trade accordingly. Other mega US banks like BAC and WFC are exhibiting roll-overs from lower highs with similar risk reward profiles so there are a few options out there.
NYSE:JPMShort
by WellTrainedMonkey
THE WEEK AHEAD: JPM, C, WFC, SMH, AND XBILater in the week, we kick off earnings season with a trio of financials: JPM, C, and WFC,* all of which announce on Friday before market open. Generally speaking, I haven't played a lot of financials in the past, since their background implied volatility never seems to bump up significantly enough. Here, however, with JPM's implied at 32, C's at 33, and WFC's at 33 -- all toward the upper end of their 52-week ranges, I figured I'd take a look to see whether "this time is different." It looks like it is ... . The April 20th 23 delta 104/114 short strangle in JPM is paying 1.47 at the mid with break evens at the one standard deviation line, and the corresponding defined risk setup (an iron condor) with strikes at 101/104/114/117 is nearly paying one-third the width of the wings -- a .96/contract credit, with break evens between the expected and a one standard deviation move. The C April 20th 65/72.5 20 delta short strangle is paying 1.00 even with break evens at the one standard deviation line, implying that a defined risk setup isn't going to pay at least one-third the width of the wings. Moreover, the longs clear of the 20's go 2 1/2 wide ... . In WFC, the April 20th 49.5/55 22-delta short strangle pays .87/contract with expected move break evens ... . Out of these three, I'd probably go with the JPM play because the defined risk setup is paying nearly one-third, and the strikes wide of the 20-delta strikes don't go all "wanky." Having strikes in one-wide increments basically everywhere generally leads to fewer rolling headaches. That being said, it's a long way between here and Thursday close, which is when you'd want to look at these underlyings again, adjust your setups accordingly, and see whether they're still worth your while. On the exchange-traded fund front, the top five implied volatility wise are: OIH (37), SMH (36), XBI (36), XOP (35), and EWZ (32). I'm already in XOP and EWZ plays, so the only thing that makes personal sense for me out of that group are potential plays in SMH or XBI, although I'm sure there's still juice to be had in just short strangling XOP (the May 25th 31.5/38's paying 1.00). The SMH May 18th 90/108 short strangle (20 delta) pays 2.55 with expected move break evens; its defined risk counterpart, the 87/90/108/111 pays .93, slightly short of the one-third I normally look for, but probably good enough for a less than 40 day until opex setup. The XBI 75/91 pays 1.98 with expected move break evens; the 72/75/91/94 pays .85 ... . * -- Given that this trio is closely correlated, it may also be worth taking a look at XLF, although with a background implied of 28, that isn't looking all that juicy at the moment ... .
S
by NaughtyPines
7
$XLF Is the Financial Pullback Something More? (includes video)U.S. financial stocks have been in pullback mode this week despite the SPX moving higher. Considering that financial stocks had been a big boost to market gains over the last several months, this could be concerning. The XLF is down about 3% - and regional banks KRE down 6% - since the recent top. Let's put this move into context, shall we? As MacroView as posted before, financial stocks really began to rally in early Sept just as the 10s/fed funds curve bottoms around 90 basis points. The correlation has been rather strong between .65 to .93. In our view, the curve and financials rallied on two things: markets were trying to price higher inflation (we saw this as the long-end steepened) vis-a-vie higher commodity prices. Then, markets were anticipating Pres. Trump nominating John Taylor as the next fed chair, who would be uber hawkish. We were happy to take the other side of that bet. Powell is dovish. In turn, we saw yields and copper, particularly, head lower. The 10s/fed funds rate topped out at 131 basis points and began to trade lower on the above events. Price action in XLF and KRE weakened and the pullback ensued. Click the here to listen to where support may be found and whether or not financials and the curve will rebound. Check us out on twitter @macro_view
AMEX:XLF
by MacroView_TrendFlex
Wells Fargo - Short Term Sell OpportunityThe currencies market has been slow the last two weeks. This is where having a stock/equities portfolio comes in play. Short term wise, we do have a sell opportunity on Wells Fargo, WFC. Fundamental analysis 1) Revenue has been growing, but net income has been falling; 2) Operating cash flow and FCF dropped drastically; and 3) Both ROA and ROE has been dropping. All these fundamental financial ratios are concerning for WFC. Technical analysis We have seen price completed a 5-wave structure, and is potentially still in a correction. Price made an impulse drop from 59.97 to 51.22 recently and has since been moving sideways. Looking at how price is currently developing, we are expecting one more move to the downside after one more push to the upside between 56.18 to 57.84 region. Potential target for the short term sell opportunity will be around 48.84 to 49.85 area. **Do you own due diligence as this is simply one perspective of the market.
NYSE:WFCShort
by KarYong