Halftime Report: How To Protect And Profit During Earnings!
Stocks traded lower Friday with investors on edge knowing that the pace of earnings will pick up next week with results coming in from Johnson & Johnson, JPMorgan, Google and other heavy-hitters. The market is looking closely to these reports for their outlooks – believing they could signal where the economy might be heading.
Investors have sent major indexes down about 7 percent since mid-June on the belief that a more than 40 percent run-up in stocks this spring was unwarranted considering the problems that still plague the economy such as rising unemployment and flagging consumer confidence which soured in the beginning of July.
How should you protect and profit?
Instant Insights with the Fast Money Traders
I’m watching the SPDR, reveals Jeff Tomasulo. The fact that the SPDRs are under 88 suggests further weakness. As a result, I’d keep an eye on weak stocks in technology and commodities. If they break though key levels I’d get short providing the SPDR is below 88.
I think we’re seeing a risk aversion trade, counsel Jim Iuiro that is a rotation out of stocks and into Treasurys. I think that continues so I’m long put spreads.
I think the trade is to buy straddles and play both direction, says Brian Schaffer.
Ahead of financials reporting over the next few weeks I would not be a buyer of banks, counsels Chris Zook. I think the numbers will be decent but they probably won’t knock your socks off. And there could be room on the downside.
OIL BREAKS BELOW $59
U.S. crude prices sank below $60 a barrel on Friday and were poised for their biggest weekly fall since January as traders focused on economic uncertainty.
"The mood has changed and people are losing confidence about the economic recovery," says Simon Wardell of Global Insight. "We are in one of those phases where no matter what happens in other markets oil will likely go down."
I agree, adds Chris Zook, think the decline in crude has to do with growing concerns about a second leg down.
I don’t like anything about oil right now, counsels Jim Iuorio.
If you’re an aggressive trader I think you put a trade on – betting that oil pulls back to the low $50’s, counsels Jeff Tomasulo.
TAKE YOUR POSITION: TECH EARNINGS NEXT WEEK
Investors are turning their attention to tech after Goldman Sachs changed their outlook on a number of these stocks. On the upside Goldman raised the U.S. hardware sector to "attractive" from "neutral," on expectations of a potential upside, and they added Dell to their prestigious Conviction Buy list.
But perhaps most notably Goldman cut estimates on both Western Digital and IBM to "neutral" from "buy," based on valuation, and said all the advantages of Western Digital have already been priced into its stock.
On IBM, the analyst said the potential upside to the stock's $120 price target is less than the other buy-rated stocks.
Considering the profit reports that lie ahead how should you play tech?
I’m on the other side of Goldman, says Brian Schaeffer. I’d be a buyer of IBM. But I’d do it with options and sell out of the money puts.
Tech Week Ahead
Monday 7/13 : Novellus
Tuesday 7/14 : Intel
Thursday 7/16: Google, IBM
REFINERS FALLING AS CVX WARNS
Shares of the major refiners tumbled on Friday after Chevron said earnings from refining fuel will be far lower versus the first quarter largely due to significantly lower refining margins in the U.S.
Should you buy refiners on the dip?
I would not buy the refiners, counsels esteemed trader Dennis Gartman, not on your life. Refining is a very bad business right now. Margins are getting squeezed and demand is withering. Stay away.
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Trader disclosure: On July 10th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (MSFT), (PBR); Finerman's Firm And Finerman Own (BAC) Preferred Shares; Finerman's Firm And Finerman Own (RIG); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (SPY), (USO), (BWA), (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm And Finerman Own (FLS); Seymour Owns (TSO); Terranova Owns (TER), (FTO), (SUN), (RIMM), (MSFT); GE Is The Parent Company Of CNBC
Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV); Virtus Investment Partners Owns More Than 1% Of (ABD), (CBL), (CAL), (CLB), (DLR), (EXR), (IGE), (MEE), (DBC), (DBV), (DBA), (SKT), (TNB), (UA), (WBMD);Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
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