Chart Advisor: Infrastructure Inspiration

Articles From: Investopedia
Website: Investopedia

Monday, 8th November, 2021

1/ Stocks push higher after spending bill passes 

2/ The Trade Desk beats estimates, raises guidance 

3Coinbase option traders bullish before earnings 

4/ The bottom line

1/ Stocks Push Higher After Spending Bill Passes 

Major averages rose on the passage of an infrastructure spending bill and ahead of key economic reports regarding inflation. State Street’s Dow Jones Industrial Average ETF (DIA) and iShares Russell 2000 ETF (IWM) each added 0.3%, notching record highs intraday. State Street’s S&P 500 Index ETF (SPY) remained flat, while Invesco’s tech-heavy Nasdaq 100 ETF (QQQ) fell 0.1%.  

Several fresh inflation readings are slated for release this week. The producer price index and consumer price index reports are expected Tuesday and Wednesday, respectively. While the Federal Reserve has recently announced plans to begin tapering its $120 billion per month in bond purchases, continued expanding inflation could further influence Fed policy. 

The U.S. Congress passed a $1 trillion infrastructure spending bill over the weekend, leading to a rise in the materials and energy sectors. State Street’s Materials Sector ETF (XLB) and Energy Sector ETF (XLE) led the benchmark SPY index on Monday, as investors piled into stocks that could benefit the most from expanded federal spending.  

2/ The Trade Desk Beats Estimates, Raises Guidance 

Investors bid up the share prices of The Trade Desk (TTD) after the company reported better-than-expected results in its fiscal third quarter earnings announcement. Analysts expected the digital advertising company to announce $0.15 in earnings per share (EPS) and $283.93 million in revenue—TTD reported $0.18 in EPS and $301.09 million in revenue. TTD’s guidance for the fourth quarter also came in higher than anticipated. 

Based on the favorable earnings results, TTD stock surged 30%. The chart below compares the recent performance between TTD and Invesco’s Nasdaq 100 ETF (QQQ). The technology sector has been on a tear amid relatively strong third quarter earnings results, helping boost QQQ by 28% year-to-date. Even with today’s earnings-based share price increase, TTD has only added 15% in the same span.  

Chart watchers should recognize that prior to earnings, TTD had been on a slight downward trend. The large gap-up could help TTD find a higher level of support. 

3/ Coinbase Option Traders Bullish Before Earnings 

As Bitcoin (BTCUSD) and other cryptocurrencies have surged, optimistic investors have bid up the share prices of Coinbase (COIN) ahead of the company’s fiscal third quarter earnings announcement. Wall Street expects COIN to announce $1.72 in EPS and $1.58 billion in revenue. COIN, the largest U.S. cryptocurrency exchange, is due to report earnings on Nov. 9, after the market closes.  

Chart watchers can recognize that COIN shares have risen to an extreme high of its volatility range, with the stock price currently at a level only surpassed on the day of its IPO.  

Option traders appear to be positioned for the share price to continue to climb in the near term. That’s because the open interest for COIN features over 238,000 call options compared to 170,000 puts. Moreover, implied volatility suggests that many of these puts are being sold, rather than bought, which reflects a bullish sentiment. Recent trading volumes also favored calls over puts at a rate of more than 3.5-to-1.

4/ The Bottom Line 

Stocks edged higher to open the week, bolstered by the passage of a big U.S. infrastructure spending bill. The Trade Desk rose on better-than-expected quarterly earnings while option traders bet big on a Coinbase beat.  

Originally posted on 8th November, 2021

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