Monday’s Vital Data: Canopy Growth Corp, Microsoft and Netflix

U.S. stock futures are trading higher this morning.

Heading into the open, futures on the Dow Jones Industrial Average are up 0.24%, and S&P 500 futures are higher by 0.21%. Nasdaq-100 futures have added 0.30%.

In the options pits, call trading carried equities into the weekend, even as overall volume settled at above-average levels. Specifically, about 20.4 million calls and 16.9 million puts changed hands on the day.

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The action at the CBOE mirrored the bullishness with the single-session equity put/call volume ratio closing near Thursday’s lows at 0.53. At the same time, the 10-day moving average matched Thursday’s close near 0.62.

Options activity was a mixed bag on Wednesday (options traders zeroed in on analyst actions yesterday). Canopy Growth (NYSE:CGC) shares fell after a disappointing earnings report. Microsoft (NASDAQ:MSFT) finally succumbed to profit-taking after notching three record highs in a row. Netflix (NASDAQ:NFLX) rallied for its fifth day in a row on heavy volume.

Let’s take a closer look:

Canopy Growth Corp (CGC)

Last week’s earnings report provided little help to Canopy Growth Corp’s struggling stock price. By day’s end, the Canadian-based Cannabis company slipped 8% to close near a new five-month low. Fellow pot stocks Cronos Group (NASDAQ:CRON) and Aurora Cannabis (NYSE:ACB) both fell in sympathy, though their losses were pared before the closing bell.

For the fiscal 2019 fourth-quarter, Canopy saw revenue of CAD $94.1 million. The number inched past analyst estimates for CAD $93.7 million and reflected a 13% rise over last quarter’s revenue. Despite the slight bump in sales, CGC reported a net loss of CAD $323.4 million or 98 cents per share.

Friday’s plunge landed CGC at the lower end of its multi-month trading range and places it on precarious footing heading into the new week. Until the stock can reclaim the high ground above resistance at $44.40, steer clear of bullish trades.

On the options trading front, traders favored calls over puts on the session despite the thrashing. Total activity swelled to 404% of the average daily volume, with 115,508 contracts traded. Calls claimed 56% of the session’s sum.

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Option premiums were pricing in a $2.95 or 7% gap on the news. That makes Friday’s 8.1% drop slightly outside of expectations, marking a small win for volatility buyers ahead of the event.

Microsoft (MSFT)

Record highs continue to stack up for Microsoft. Last week, the software titan notched three all-time highs in a row before sellers finally stopped the advance on Friday. The snap-back from June 3rd’s wrecking of the tech sector on government oversight concerns has been relentless. Since bottoming at $119.01, MSFT stock has powered higher by 15%.

Volume reached a crescendo ahead of the weekend reflecting powerful accumulation beneath the surface. While the overbought conditions certainly warrant some backing and filling, there’s no doubt institutions highly favor Microsoft right now.

On the options trading front, calls ruled the roost. Activity popped to 131% of the average daily volume, with 206,455 total contracts traded; 62% of the trading came from call options alone.

Implied volatility drifted to 23% or the 18th percentile of its one-year range. Premiums are now pricing in daily moves of $1.99 or 1.5%.

Netflix (NFLX)

The news was light on Friday for Netflix, but that didn’t stop buyers from sending the streaming media giant higher for the fifth consecutive day. Last week’s rally returns NFLX stock to within striking distance of an upside breakout. What began as a well-deserved pause after a red-hot rally to kick-off 2019 has morphed into a tight five-month trading range.

Given the utter lack of directional movement, volatility measures like the Bollinger bands have narrowed considerably on the weekly time frame. At some point, the stalemate will end, and if history is any indication, the breakout should bring fireworks. The two levels to watch for resolution are $386 and $340.