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NASDAQ100 Call Options Attractive On Stimulus Prospects, Positive Q2 Earnings -

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Jul, 12th 14:36

NASDAQ is heading to the highest level since the beginning of the year at 4591.53, after a better-than-forecast jobs report brightened the economic outlook without fueling expectations that the Federal Reserve will raise interest rates in upcoming meetings. Meanwhile, investors are preparing for the beginning of the second quarter (Q2) earnings season. Some initial optimism was fuelled by some better than expected earnings reported yesterday. The index is currently trading 0.6% higher compared with yesterday’s close.

NASDAQ shares experienced a sharp overnight gain with advancing issues outnumbering declining ones. At the close of trading yesterday, 30 stocks closed down, 1 unchanged, and 69 closed up. The best performer was the Chinese electronic commerce company that recorded a 5.02% advance. Runner-ups included American Airlines Group Inc and Tesla Motors Inc., that were up 3.73% and 3.68%, respectively.

Global shares are finding support from prospects that policy makers around the world will take actions to prevent any slowdown/damage from Brexit. The Bank of England (BOE) is expected to cut its benchmark interest rate this week, while the Japanese Prime Minister Shinzo Abe is expected to expand the fiscal stimulus after his convincing victory in the Upper House elections over the past weekend.

In earnings reports being awaited today, CSX Corporation is set to report its earnings today. Analysts forecast earnings per share (EPS) of $0.46, down exactly $0.10 or 17.86% from 2014’s $0.56 EPS, as the decline in coal demand has weighed on CSX’s coal carloads. After posting EPS of $0.37 for the previous quarter, analysts have forecast a 24.32% growth in the EPS. The stock rose 0.52% in trading yesterday, hitting $26.67.

The US Dollar Index, lost 0.5% to 96.10 compared yesterday. The market is currently pricing the odds of a Fed rate hike in September at 11.9%, up from 5.9% yesterday. The odds of an increase at the policy meeting in July are at 0.

This week, an array of speeches from Federal Reserve officials are on the cards, providing investors some insights into future interest rate policy.

Interest rates and earnings shall remain the dominant themes this week for the stock markets with earnings potentially supporting the market higher, while any signs of a potential interest rate hike sending the markets into correction mode.


Fig. NASDAQ D1 Technical Chart

The NASDAQ has gained continuously for a week, supported by the green trend indicator arrow. ADX is at 30.12, combined with DI+ (green line) heading far higher and diverging strongly from the DI- (red line), signaling strong bullish momentum for the index. RSI is heading towards the overbought territory, indicating that a continuous up-move could be triggered. The price is expected to continue the current trend, and test the resistance area at 4696.38.

Trade suggestion

Buy Digital Call Option from 4577.25 to 4696.38 valid until July 15, 2016


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