The market opened lower on the negative headlines from overseas, which we covered this morning, and the momentum to the downside was strong as the Dow headed towards a triple digit loss shortly after the bell. The index has traded to a low of 11,573 so it didn’t quite hit triple-figures.
We have bounced off the lows but some investors seem to be taking profits ahead of the earnings season which kicks off tonight. Alcoa’s (AA, $16.48, up $0.06) earnings report after the close today will “officially” be the start of 4Q earnings season and Wall Street is looking for a profit of $0.19 a share on revenue of $5.7 billion, on average. The consensus range is for Alcoa to earn $0.16-$0.30 on $5.5-$6.1 billion for revenue so there is a chance the company surprises or disappoints.
Alcoa has posted better-than-expected results for the past two quarters, beating both earnings and revenue estimates. The 52-week high is $17.60 and shares were strong all last week heading into today’s report. We pointed out in our latest video that the company would be announcing today and a call option trade would have worked well last week. For our trading manual, How to Trade Options on Momentum Stocks, we show you how to play earnings but we will probably sit Alcoa’s out. With a recent 20+% pop in the stock, we feel the easy money has already been made.
One group having a rough day is the Educational sector which is getting hammered after Strayer Education (STRA, $118.17, down $35.07) said winter enrollment is off by 20%. We have been warning you to stay away from this sector for years (unless you are shorting it), especially Apollo Group (APOL, $35.89, down $2.09) because of the shady shenanigans they use to enroll people. The entire sector is a joke and the hammer is about to fall as the sector’s debt begins to swell on unpaid student loans.
As we head to press, the Dow is down 44 points to 11,630 and we are looking for 11,600 to hold. There is further support at 11,500 but we doubt things get that crazy today.
The S&P 500 is off by 4 points to 1,267 and has traded to a low of 1,262. After breaking out past 1,250-1,260 last week, this zone should act as support.
The Nasdaq is showing a decline of 5 points to 2,698 and has dipped below 2,700. There is further support at 2,650 but Tech still looks strong.
We have a ton of information to cover this afternoon in our Members Area as one of our trades was stopped out. We had already closed half of the recommendation to protect profits but the other half continued to surge before falling back today. Still, we can’t complain. Our subscribers banked over 180% on the trade.
We will be back Tuesday morning with a full update.