BY: RYAN SULLIVAN
How’s the market looking through 2022 so far?
The $SPDR S&P 500 ETF Trust(SPY)$ continues to maintain its bear market trend. Although, price action since mid-June has been decidedlybullish. The SPY is currently trading at $411.55, down 13.59% from its opening price of 2022. We are currently up 13.11% from the SPY’s 2022 low, which was recorded on June 17th, 2022.
Since reporting inTop Stock to Watch in August 2022, the SPY did push up into the $420-$430 price range to test resistance and found it at $431. Sellers have since taken over and pushed the price back down to test the $410 support level. We’ve bounced off $410 once this week and are currently retesting.
The $431 resistance falls near the top of our downward SPY channel. It’s possible that the SPY retests upper resistance around $430 from here, looking for a trend reversal. However, it is likely that that test will fail, and we will move lower to test support in the $399 to $409 range.
Fig. 1: Year to date price percentage change for $SPDR S&P 500 ETF Trust(SPY)$ , $Invesco QQQ Trust(QQQ)$ , and $SPDR Gold Shares(GLD)$ .Best Stocks to Watch in September
Fig. 2: Year to date price percentage change for SPY, ADBE, MU, CCL, and DOCU.
1. DocuSign Inc (DOCU)
Earnings Date: September 9th, 2022 (After the close)
DocuSign is a global provider of cloud-based software. DocuSign Agreement Cloud is a cloud software suite that automates and connects the entire agreement process. Agreement cloud products include E-signature, Contract Lifecycle Management, Insight, and Analyzer.
DOCU is currently trading at $57.56, down 62.22 percent from its opening price of 2022. DOCU is trading just off its 2022 low of $55.86. Over the last five quarters, DOCU’s sales have grown from $469 million to $588 million. Net income has remained negative over the same period, with the largest loss being just over $30 million, two quarters ago.
DOCU’s balance sheet has grown slightly over the last five quarters. Total liabilities grew from $2 billion to $2.2 billion. Total assets grew from $2.2 billion to $2.5 billion.
If you like DOCU and want to get long, this is a good opportunity at a price level we haven’t seen since 2019. However, DOCU is firmly in a downtrend, selling off more after each rally. We are now testing the $56 support level for the third time since mid-June.
Remaining neutral through earnings is an option, unless you have a directional assumption at this price.IVis above 50 in September options and the bid-ask spread is a few cents wide out of the money.
2. Adobe Systems Inc (ADBE)
Earnings Date: September 20th, 2022
Adobe is one of the largest software companies in the world. The Digital Media solutions segment of their business enables small businesses and enterprises to create highly compelling content. Within Digital Media, the two major components of revenue are the Creative family of products and Document Services products.
ADBE is currently trading at $387.76, down 31.29 percent from its opening price of 2022. ADBE is up 14.69 percent from its 2022 low. Over the last five quarters, ADBE’s sales have grown from $3.8 billion to $4.3 billion. During the same period sales remained around the same level, $1.1 billion to $1.2 billion.
ADBE’s balance sheet over the last five quarters has remained consistent. Total assets oscillated around $25 billion to $27 billion. Total liabilities grew from $11.7 billion to $12.3 billion.
ADBE is down 44.58 percent from its all-time high price of $699.44 in 2021. Such a large down move makes for an opportunity to get long ADBE, if you have a long assumption. Out of the money, defined risk, shortput spreadswill play here. If you believe ADBE’s downtrend will continue, try a neutral strategy skewed to the downside.
3. Micron Technology (MU)
Earnings Date: September 27th, 2022
Micron manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies. Its solutions are used in leading-edge computing, consumer, networking and mobile products.
MU is currently trading at $58.52, down 37.68 percent from its opening price of 2022. MU is trading up 13.83 percent from its low price of 2022, which was recorded on July 1st. Over the last five quarters MU’s sales have trended up. Sales grew from $7.4 billion to $8.6 billion. Net income grew from $1.7 billion to $2.6 billion during the same period. Both sales and net income moved up and down during the last five quarter period.
Total liabilities and total assets have grown consistently over the last five quarters. Total liabilities grew from $13.6 billion to $16 billion. Total assets grew from $55.9 billion to $65.2 billion.
MU was affected by the COVID-19 lockdowns, but it appears that they have fared better than others in the same industry. It seems that due to the demand for the products that MU manufacturers, their business was able to weather challenges more easily than others.
IV for September options is currently above 50. A neutral to long short premium strategy is an option here. Out of the money bid-ask spread is under $0.05.
4. Carnival Corp (CCL)
Earnings Date: September 29th, 2022
Carnival operates as a cruise and vacation company. Carnival is the largest cruise operator in the world. CCL operations in North America, Australia, Europe and Asia. The company's cruise brand includes Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard.
CCL is currently trading at $10.11, down 50.83 percent from its 2022 opening price of $20.56. CCL is currently trading up 24.69 percent from its low of 2022, which was posted on June 30th. Over the last five quarters CCL’s sales have rocketed upward from $50 million to $2.4 billion. During that same period net income remained negative with a slight upward trend. Net income grew from -$2 billion to -$1.8 billion.
CCL’s balance sheet over the last five quarters has been in a constricting state. Total assets are dropping, and total liabilities are growing. Total assets fell from $55 billion to $52 billion, and total liabilities grew from $37 billion to $44 billion. This is the type of behavior that we would expect from a company that has been forced to virtually stop all operations, and then try to restart. They have been forced to sell excess assets and take on more debt to continue operating.
This is an opportunity to get into CCL at a price level that we haven’t seen since 1995 (prior to 2020). It is possible that the $8 to $10 range is a bottom for CCL, and we will continue to record constructive price action through the rest of 2022. If that is something you believe in, going long into earnings may be an effective catalyst.
If you have less conviction, a neutral short premium strategy is an option in CCL, in September options. However, it may be prudent to wait another week or two before opening a position in September, morestrikeswill likely be added to what exists in September options right now.
Source: https://www.tastytrade.com/news-insights/best-stocks-september-2022
Comments