Fast Money 360: Bank of America
When Bank of America reports earnings ahead of Friday's opening bell, it will be the last of the big banks to release its quarterly results. So how should you game this stock into and ahead of earnings?
Seems like a good time for "Fast Money 360."
Find out what fundamentals, technicals and insights from the options world suggest lie ahead for this stock .
Christopher Whalen, managing director of Institutional Risk Analytics, said he'll wait for more clarity on BAC's mortgage exposures.
"It's not like their going to fail," Whalen explained. "But I think they face some daunting prospects."
Carter Worth, chief market technician at Oppenheimer, said he's a seller of BAC going into earnings.
Worth noted that in the past six weeks, the stock had a "meaningful bounce," where it went from roughly $11 to $15 a share. Worth thinks the action is "a little steep" and is otherwise "little overdone." He expects the stock could go lower when it reports earnings on Friday.
Bank of America saw heavy put buying this week, reports Scott Nations, president and chief investment officer of NationsShares. The most active option, though, was the Jan. 15 calls. Buyers and sellers of this option "battled to a draw."
Given the options activity and that Nations thinks BAC's problems are overdone, he's a buyer going into earnings.
What do you think? We want to know!
From the options market, Jon Najarian is watching some unusual activity in Anadarko Petroleum. Najarian said he saw "very fast" activity early on and it only continues to build.
Someone bought the May 85, 95 call spread at $2 roughly 5,000 times, said Najarian, co-founder of optionMONSTER.com. That may seem like an "awful lot" of money for a $9 out-of-the-money call spread, he explained, but with a slight move to the upside you could double your money.
Based in The Woodlands, Texas, Anadarko engages in the exploration and production of oil. So should black gold move $7 to the upside, for example, Najarian said this options strategy could really pay off for whoever's buying these options.
TAKE YOUR POSITION: GOOGLE
Google is expected to report a 22 percent jump in fourth-quarter revenue thanks to a busy holiday season, though it will face questions about long-term growth when it unveils results on Thursday.
Shares of the world's No.1 Internet search engine underperformed the market in 2010 but have gained roughly 6 percent in the past three weeks as investors anticipate that Google will benefit from healthy online advertising spending.
So is Google worth buying ahead of earnings?
Mark Mahaney, an analyst at Citigroup, recommends a long position in the search giant. In the next six months, he expects the stock to trade above $700 a share. He doesn't, however, thinks Thursday's earnings will be blockbuster. Instead, Mahaney thinks margins will be a little surprising. The Street expects margins to be down, but he thinks it could be a "source of disappointment."
People are expecting margins to tick up from current levels at 53 percent, Mahaney explained. If it goes up, the stock could also go up, he said. If it ticks down, the stock caps out and could come down. If the margins are flat, he thinks the stock will trade sideways.
Najarian plans to watch where margins go from 53 percent, but is also hoping for information on how Google's Droid operating system and advertising revenues have fared.
POPS & DROPS
Stocks eased off the lows of the day as investors absorbed mostly positive economic news as well as word of surging profits at Morgan Stanley. For their part, the "Fast Money" traders thought the following to be the most interesting market movers:
Pops (stocks that went up)
Wendy's/Arby's Group (WEN) popped 8%: The third biggest U.S. hamburger group reported its exploring a possible sale of its Arby's brand. That's a good strategy going forward, said Veracruz founder Steve Cortes, because Arby's has bene losing money for WEN. So on this news, he's a buyer.
Drops (stocks that went down)
Massey Energy (MEE) dropped 3%: The coal mining company was cut to ‘hold’ from ‘buy’ at Stifel. Stuart Frankel's Steve Grasso said he would wait to see if this stock can hold the $52 level before jumping in.
Union Pacific (UNP) dropped 3%: The rail company reported a record fourth-quarter. It revealed that volume growth is slowing, though. If the stock falls to $92 a share, Drakon Capital's Guy Adami would buy shares.
Huntington Bancshares (HBAN) dropped 4%: The Ohio-based bank reporting net income in fourth-quarter of 5 cents a share, missing the Street’s estimate of 8 cents. Najarian still likes HBAN and would buy on this dip.
CALL THE CLOSE
Consider this a compass guiding you through the sometimes choppy waters of investing. The "Fast Money" traders on Thursday stated where they think the market is headed and how they're trading it.
Najarian is watching General Electric ahead of earnings. He is seeing a lot of unusual options activity in this name.
Grasso said there is a lot of buying ahead of options expiration on Friday. Ultimately, he thinks the market goes lower. Najarian thinks the market will go higher into options expiration.
Being as the S&P 500 held onto the 1,272 level, he thinks it could bounce from here.
Cortes didn't have a trade, but gave a shout out to the Chicago Bears, a National Football Leauge team. On Sunday, the Bears play the Green Bay Packers in the division championship. The winner of that game will advance to the Super Bowl.
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Trader disclosure: On Jan. 20, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE) and (BTU). Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE), (PRST) and (S). Steve Cortes is short (XRT) vs S&P long. Steve Cortes is short (LVS). Steve Cortes owns (TSN). Steve Cortes owns (SVU). Steve Cortes owns (CLX). Steve Cortes is short Gold. Steve Cortes is long U.S. Treasuries. Jon Najarian owns (BBY), is short (BBY) calls. Jon Najarian owns (F), is short (F) calls. Jon Najarian owns (GM), is short (GM) calls. Jon Najarian owns (CSCO), is short (CSCO) calls. Jon Najarian owns (IBM), is short (IBM) calls. Jon Najarian owns (MS), is short (MS) calls. Jon Najarian owns (WMT), is short (WMT) calls. Jon Najarian owns (APC) call spreads. Jon Najarian owns (RAX), (RVBD), (JNPR) and (APKT).
General Electric is the parent company of NBC Universal, which is the parent company of CNBC.
Adami's wife works for (MRK)
Stuart Frankel & Co and it’s partners own (AAPL)
Stuart Frankel & Co and it’s partners own (ABX)
Stuart Frankel & Co and it’s partners own (CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (NEM)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (S)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own (UAL)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)
Marshall has no disclosures
Citigroup or an affiliate received compensation for products and services other than investment banking from (GOOG) in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, (GOOG) as a client, providing non-investment-banking services
Citigroup Global Markets Inc. currently has, or had within the past 12 months, (GOOG) as a client, and the services provided were non-investment-banking, nonsecurities-related
Citigroup Global Markets is a market maker in (GOOG)
FAST MONEY 360
Chris Whalen, Carter Worth, and Scott Nations have no disclosures on (BAC)
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