A discussion of the potential price action from today's quadruple witch expiration was a big topic on today's PreMarket Prep Show.
Buy Imbalances Kept Growing And Growing
Every day on the show, we discuss the opening order imbalances for NYSE stocks that will dictate the opening price of stocks on the exchange. They can be especially important on a day like today -- a quadruple witch expiration, which refers to the third Friday of every March, June, September and December when market index futures, market index options, stock options and stock futures all expire.
Co-host Dennis Dick noted the large buy imbalances that continued to get larger as the show progressed. The reason for noting these imbalances is that they can provide for several trade setups that can be attempted on the opening print.
As it turns out, these large imbalances turned out to be true in many instances. For example, a mild mannered stock like Eli Lilly (NYSE: LLY), which usually moves a few points a day, gapped up from Thursday's close ($130.85) over $6 to open at $137. Within seconds, the issue was trading under $132 as others attempted to sell the issue above its all-time high on Thursday at $130.99.
The Weak Get Weaker
Late Thursday, US Steel (NYSE: X) issued lower fourth-quarter EPS and 2019 guidance and cut its quarterly dividend. This had the serial underperformer in the greatest bull market of all time under selling pressure.
When it was being discussed on the show, it was trading at the $12.50 area, down less than $1 from Thursday's close ($13.38). Both hosts expressed that it did not seem to be down enough on the negative news and cited $12 as a possible support level.
After a lower open, it had a brief pop to $12.49 and resumed its mover lower. At this time, $12.02 stands as the low for the session and it rebounded back to the $12.20 area.
Nike Q2 Beat Not Good Enough After Extended Pre-Earnings Rally
After the close on Thursday, Nike (NYSE: NKE) announced an EPS beat of 13 cents along with a sales beat. On the surface, a nice beat.
However, the way an issue trades ahead of an earnings report can often be more significant than what the actual report reveals. For example, Nike was traded as low as $91.31 earlier in the month and reached $101.27 (11% move) on Thursday as investors anticipated a good report, not to mention a strong broad market.
With such an extended pre-earnings run, the company had to blow away the estimates for the rally to continue. Nike did manage to have a higher open, but peaked just above Thursday's high at $101.40 and was in the red by $2.
Alan Brochstein Joins The Show
Midway through the broadcast, Alan Brochstein, author of the 420 Investor Newsletter joined the crew to discuss the marijuana sector. He discussed the headwinds that plagued the sector in 2019 and its prospects for a rebound in 2020.
Next week's shows will feature several Wall Street analysts that cover a variety. They will recap some of their calls in 2019 and preview 2020.
8:15 AM: Victor Anthony - Managing Director and Equity Analyst at Aegis Capital
8:35 AM: Michael Pachter - Equity Analyst for Wedbush Securities
8:35 AM: Gordon Johnson - Founder of GLJ Research
9:00 AM Gene Munster - Managing Partner at Loup Ventures, formerly of Piper Jaffray
8:15 AM Marc Chaikin - Founder of Chaikin Analytics
8:35 AM: Tracey Ryniec - Stock strategist at Zacks Investment Research