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Chart Advisor: Tech Lift


Visit: Investopedia

Monday, 30th August, 2021

1/ Nasdaq leads indexes higher 

2/ Remote communication in focus as ZM reports 

3/ Call option buying surges on Apple 

4/ The bottom line

1/ Nasdaq Leads Indexes Higher 

Invesco’s Nasdaq 100 ETF (QQQ) pushed another 1% higher, continuing momentum from the Jackson Hole Symposium last week. Tech stocks have made the biggest moves following Powell’s statements. The lack of a hard timeline on an interest rate hike gave investors a sense of confidence that share prices would rise. Apple and Amazon are both up over 3% today, which is a big contributor to the gains on QQQ. Investors are counting on a weak dollar contributing to accelerated foreign sales. However, not all the news generated optimism. Home sales missed analysts’ forecasts once again, exposing lingering scars from the pandemic. Home sales fell -1.8%, vs 0.5% expected.  

The July report missed its forecast by a larger margin. In addition to missing expectations, this also marks two consecutive months where the data has dropped. Total sales are 8.5% lower nationally year over year. “… at the moment there is not enough supply to match the demand from would-be buyers,” said Lawrence Yun, NAR chief economist. Investors appear to be shrugging off this news for now signaling their bullish bias.  

2/ Remote Communication in Focus as ZM Reports 

Investors bid up the share price of Zoom Video Communications (ZM) ahead of the company’s fiscal second-quarter earnings announcement. Analysts are expecting an adjusted earnings per share of $1.16 and over $990 million in revenue from the video conferencing giant. Earnings are expected to be released after the market closes today. While ZM has risen 1.5% today, the company has largely underperformed year-to-date, losing more than 4%.  

The pandemic has pushed ZM toward astronomical growth over the past year, as distance learning and remote work expanded like never before. While ZM has lagged its sector on the year, it has outperformed Verizon (VZ) in that same time span. The chart below illustrates how ZM has recently kept ahead of VZ, while staying relatively in front of State Street’s Communications Sector ETF (XLC) since Q1 earnings in June. 

While investors may seem optimistic before earnings, they may also be wary that ZM may not be able to maintain the sky-high revenue levels it has enjoyed during the pandemic.  

3/ Call Option Buying Surges on Apple 

Apple (AAPL) exhibited unusual option activity today. AAPL’s iPhone 13 is slated to hit shelves in September, and rumors of the new device supporting low-earth-orbit satellite communications has set space and satellite stocks jumping today. Lost in the headlines is AAPL’s more than 3% gain amid elevated option volumes. AAPL has seen nearly 1.5x the average daily volume of options traded, with an overwhelming amount (78%) of this volume being call options.  

This is notable because even as AAPL’s share price set a new all-time high in the session, the majority of option trades suggest traders and investors believe that the stock still has room to move higher. AAPL has had a year-to-date gain of 18%, adding to its nearly $2.5 trillion market cap. For all the bearish words like “taper” and “bubble” stoking investor fear, it’s interesting that the market seems to be expressing that perhaps this bull has a bit more run left in it.  

4/ The Bottom Line 

Tech stocks rose today while home sales fell. The tech move higher will likely continue as Zoom and Apple expect to report positive earnings results.  

Originally posted on 30th August, 2021

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