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PreMarket Prep Recap: Wait And See Approach To Coronavirus Outbreak, Coscto's Huge Move

There was plenty of news to cover following the three-day weekend for U.S. markets. The implications of the outbreak of a deadly virus in China, ratings changes in major issues and big sellers in Morgan Stanley were a few of the topics discussed on Monday'

Benzinga · 01/21/2020 18:51

There was plenty of news to cover following the three-day weekend for U.S. markets. The implications of the outbreak of a deadly virus in China, ratings changes in major issues and big sellers in Morgan Stanley were a few of the topics discussed on Monday's PreMarket Prep Show.

Horrible Time For A Horrible Virus In China

The culprit for the red in U.S. and China markets on Tuesday morning was the report of an outbreak of the deadly coronavirus virus in China just as the travel rush for the Chinese New Year begins.

On many occasions, the initial news surge at the onset of such events is much worse than the situation turns out to be in the long run, case in point the Ebola virus in 2014. As a result, the PMP crew was taking a "wait and see" approach to determine how much of a long-term impact could be expected on the markets.

At this time, the S&P 500 index futures have recouped pre-market losses and are attempting to make a new all-time high for the fourth day in a row.

One issue discussed in relation to the outbreak was Lakeland Industries (NASDAQ: LAKE). The reason being, the hazmat suit maker had a monster rally during the Ebola virus outbreak and raced to $30 in 2014, a level it has not come close to reaching ever since.

While it was being covered on the show, it was evident there were aggressive buyers banking on the worsening of the outbreak. "Caution" was urged in chasing the issue on the upside and investors were encouraged to observe the opening price action before blindly following the pre-market action.

As it turns out, the much higher open ($13.05 versus Friday's close of $10.97) turned out to be a selling opportunity. The issue rallied to $13.11 before reversing course and surrendering some of its gain as it has fallen back into the mid-$12 handle.

Costco Having Its Biggest Up Day In Years

After having only an $11 range for the entire month of December, Costco Wholesale Corp (NASDAQ: COST) traded higher by $8.11 at $312.79 in Tuesday's session.

For only the third time since April 2018, the company is beneficiary of an upgrade. Oppenheimer upgraded the issue from Perform to Outperform.

The issue, which has traded higher in four of its last five sessions, has far surpassed its former all-time high of $305.30.

Although a rally was expected in the issue, the co-hosts of the show did not expect the upgrade to have such a significant impact on the issue. Co-host Dennis Dick warned about the shorting of the issue if it made a new all-time high as there was no identifiable level to lean on for an exit.

Profit-Taking In Morgan Stanley Off The Open

Following its incredible earnings move and follow through, our audience was alerted to some investors taking profits in Morgan Stanley (NYSE: MS) on Tuesday's open. Dennis Dick noted an extremely large opening sell imbalance (600,000), that would exert selling pressure off the open.

After a lower open, it managed to rally into the lower-end of Friday's range, but others have joined in taking profits in the issue.

Chris Buck Joins The Show

Towards the end of the show, Chris Buck, head of Capital Markets and Sales for the Robo Global ETF was our guest. He discussed the recent price action and components of the Robo Global ETF (ARCX:ROBO) and reasons why it will continue to move higher.

At 8:35 a.m. EST on Wednesday, Jerry Parker, Chairman and CEO of Chesapeake Capital will be our guest to share his outlook for the stock and commodities markets.