All the stock that’s fit to trade
11/02/18

●New York Times (NYT) beats earnings, boosts subscribers

●Stock broke out of trading range, surged more than 8% yesterday

●Politics seen as a driver of subscriber increase


 

When a stock trades 18 times its average daily number of options less than three hours into the day, it often means something really good or really bad has happened.

LiveAction scans yesterday morning showed options traders were getting up to their elbows in New York Times (NYT) contracts yesterday:

LiveAction scan: Unusual options volume, 11/1/18. 18 times avg. NYT options volume

Source: OptionsHouse

In this case, the news was good—an across-the-board earnings and revenue beat, and an increase to four million total subscriptions.1

NYT shares responded with an 8.8% intraday rally that catapulted the stock above the resistance level of its summer and fall highs, to levels (near $29) it hasn’t seen since early 2006:

New York Times (NYT), 6/6/18–11/1/18. New York Times (NYT) price chart. Earnings breakout.

Source: OptionsHouse

Not bad, considering the stock was below $4 in early 2009 and around $11 just two years ago. In fact, the stock’s current rally took off in November 2016, which just happens to be when President Trump took office.

It would be easy to chalk that up to coincidence (not to mention irony), but there may be more to it than that. Last month, for example, JPMorgan analysts—in the process of raising NYT’s price target to $32 and giving the stock an “overweight” (strong buy) rating—cited positive long-term trends and expectations of subscriber growth “in part driven by the Kavanaugh hearings, Trump tax stories, and midterm elections.”2

In other words, driven by politics. And although the mid-term elections are just days away, it’s unlikely that the level of political contentiousness in the US will change much in the next couple of years. So, from that perspective, it could be argued that the New York Times will have a steady supply of fuel for continued growth.

New York Times (NYT), 12/1/94–11/1/18. New York Times (NYT) monthly price chart. 50% retracement.

Source: OptionsHouse

But there’s another point traders may be considering. The stock has jumped nearly 15% in the past three days, and aside from the common tendency for markets to walk back portions of exceptionally large moves, yesterday’s rally took NYT to right around the 50% retracement level of its June 2002–February 2009 downtrend (chart above).

Many traders look for reversals, if only temporary ones, when a market retraces half of a previous trend. So, there’s a chance some longs could decide to take profits around current levels, while others may probe the short side. (NYT put options volume was, in fact, a little larger than call options volume yesterday.)

Let the debates begin.

Market Mover Update: Apple (AAPL) topped earnings and revenue estimates after the bell yesterday, although the stock initially dipped after the release.

Yesterday’s rally got November off to a bullish start, and marked the S&P 500’s (SPX) first three-day win streak since September 18-20. But recently hammered small-cap stocks led the charge, with the Russell 2000 (RUT) outgaining the SPX by a 2:1 margin.

Housing stocks kept rolling, including LGI Homes (LGIH), which jumped more than 4% intraday yesterday (with options volume more than nine times average) and is now up more than 17% since October 22.

Today’s numbers (all times ET): Employment (8:30 a.m.), International Trade (8:30 a.m.), Factory Orders (10 a.m.).

Today’s highlighted earnings: AbbVie (ABBV), Alibaba (BABA), Chevron (CVX), Exxon Mobil (XOM), Seagate Tech (STX).

 

 

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1 CNBC.com. New York Times jumps on earnings beat and strong subscriber growth. 11/1/18.

2 StreetInsider.com. Trump News Flow Drives The New York Times Co. (NYT) PT To Street High $32 At JPMorgan. 10/11/18.