dani face dani quote

The Effects of COVID-19 on April Tech Earnings

A Friday Pin?

Normally I prefer directional trades, but this week is really the first closer to range bound week we’ve seen in quite some time — with a key battle going on at $2800 in the S&P. Call buyers have loaded up, which to me is a good reason for the stagnation at this price point.

Who is left to buy?

Well, the macro case is interesting because earnings is underway and companies continue to report less than what was expected, in addition to cutting guidance… yet the market holds up.

To some extent, we knew data would be bad: unemployment data, housing, earnings, infections. So it’s not too much of a shock to investors. On the other hand, I think everyone is just hoping this is all going to be over soon. The market seems to be trading on the hope that it will be.

On Friday, I discussed this live on Trader.TV with Brendan Wickens — which you can watch HERE.

But, it’s not just about the macro condition. The last week of April is going to be a big week for earnings.

April Tech Earnings

The way the market has consolidated this week suggests to me that too many traders are long, and also that the market’s waiting on a key catalyst — one that’ll likely come in the form of FAANG earnings.

Many of the companies that report next week are companies that have the best shots of making it through COVID-19 without being too scathed. 

Why? Apple (AAPL) and Microsoft (MSFT) are sitting on huge cash reserves, with MSFT’s cloud based business still growing and Microsoft Teams and Skype thriving unprecedentedly. Amazon (AMZN) of course has so much demand, they’ve had to hire another 175k workers. For the first time they aren’t making deliveries within their prime window. Facebook (FB) and Google (GOOGL) — I imagine both are being used heavily to keep in touch and keep boredom at bay. Netflix (NFLX), as we know, has had extreme demand. 

I also like to group Tesla (TSLA) in there, as TSLA (in my honest opinion) is a brand of the future, and it’ll continue to see speculation therefore driving up prices. New car sales are down 25%, yet TSLA so far still seems to be thriving, the unique car brand that’s still making it work. Of course, Elon Musk has been in the news quite a bit… which doesn’t hurt. 

With these companies (of course minus NFLX that already reported) coming up next week, I’m bullish on each which gives the market a slight bullish edge, though I view it as range bound. Next week, I believe it’ll be incredibly volatile, but until then I’m targeting higher prices in these names.

While Waiting on Earnings…

So, what did I do this week? Well, at the beginning part of the week, I was focused on momentum trading, until we got into Thursday. By Thursday, you could see the consolidation on the indexes along with key stocks — right before expiration.

That typically means it’s a good time to look for a pin.

What’s a Pin?

A pin is when a stock closes at or around a key psychological value, that tends to be a strike price with high volume and high open interest. I like to trade these with butterflies, unbalanced flies, and iron condors. 

Let’s look at Microsoft (MSFT) to dive in deeper on the topic.

This is an example of how I set up neutral trades overnight, from Thursday going into Friday, for theta decay during range bound markets. While I have an overhead target of $185 on MSFT, at least overnight for options expiration it looked like it would continue chopping in a range.

Iron condor on MSFT.

And, it’s not just Microsoft, consolidating in a range overnight with theta simply decaying. 

Check out this grid below (with these key stocks trading near their pinning strikes):

  • AAPL: $280
  • NFLX: $420
  • TSLA: $700
  • AMZN: $2400
  • MSFT: $172.50
  • FB: $185
  • WMT: $130
Friday grid displaying many close to pins in key tech names.

I set the following trades in my Mastery program, during our Thursday live trading session. We traded TSLA, AMZN, MSFT, AAPL and AXP, taking a loss in AMZN but wins in the rest of them.

What about Momentum?

As for momentum, Thursday and Friday were definitely not our days for momentum.

But the great thing about consolidation is that it’ll almost always resolve itself with a momentum breakout. Consolidation moments are key moments to look for setups to trade, on the breakout!

While I prefer to trade momentum, sometimes the market just doesn’t give it to us. When it doesn’t, looking at moments in time where we can benefit from consolidation works as well. These tickers largely remained range bound for two days, giving us a good opportunity to sell some premium.

Want more trading education? Follow me here by signing up for my free newsletter, at www.fivestartrader.com, or in my Mastery program which you can find at www.simplertrading.com/profits. You can also follow me on Instagram, Twitter @traderdanielle, or on Facebook.

Leave a Comment

Up Next...

Starting 2021 Off Right

Hey Five Star Trader, To help you get 2021 started on the right foot, I created a free webinar that includes my end of year review of 2020 (what worked, and what did not), as well as how I trade my top three core setups and when to use each one. Also included, is my … Read more

Read More

700% account growth in 2020

Last week, we talked about my end of year review. I grew three different accounts, two with 500% growth and a third with 700% growth. These three accounts were a futures account, an options account, and another options account. This has been my best year on record, thus far. If you missed last Thursday’s episode… … Read more

Read More

My ‘End of Year Review’

The beginning of a new year always has me reviewing the past year and looking forward to goals for this year. Last year, despite the craziness, was actually an amazing year for me. I grew three different accounts, two with 500% growth and a third with 700% growth. These three accounts were a futures account, … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now

Free Downloads

Squeeze Checklist

When you find a squeeze, check these boxes to see if you’re looking at a higher probability bet.

Risk Checklist

Before we can make money we must define the rules that define our risk parameters.

High Probability Plays in a Directional Market

Download Danielle's free eBook

10 Steps to Becoming a Successful Trader

Commit to becoming a successful Trader

Strategy Selection Risk Gauge

Danielle focuses on creating a constant stream of income through the selection of trend-following, directional plays.

Upcoming Appearances

Check Back for Upcoming Dates