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Thursday’s Vital Data: Bank of America Corp (BAC), Micron Technology, Inc. (MU) and Alibaba Group Holding Ltd (BABA)

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U.S. stock futures are pulling back this morning, after the major market indices tested new all-time highs in the wake of the two-day Federal Open Market Committee meeting. As expected, the Federal Reserve laid out a gradual plan to unwind its $4.5 trillion balance sheet and set expectations for more interest rate hikes.

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On the options front, volume was below average as only about 15.3 million calls and 12.8 million puts crossed the tape. On the CBOE, the single-session equity put/call volume ratio rose to a two-week high of 0.69, with the 10-day moving average held at 0.64.

In fact, the Fed promised at least one more rate hike this year, and three more in 2018. If the Fed can hold to this plan - and there's still no guarantee the economy will cooperate - we may finally see the beginning of the end for money on Wall Street.

Against this backdrop, futures on the Dow Jones Industrial Average are down 0.05%, S&P 500 futures are off 0.04% and Nasdaq-100 futures have slipped 0.04%.

In the options pits, volume came roaring back ahead of the Fed's monetary policy statement. Overall, about 16.2 million calls and 14.2 million puts changed hands on Wednesday, blowing past the past three weeks' average. Over on the CBOE, the single-session equity put/call volume ratio dipped to 0.61, matching the 10-day moving average.

Taking a closer look at Wednesday's volume, Bank of America Corp (NYSE: BAC ) saw a spike in call option volume following the Fed's promise for a string of interest rate hikes next year. Elsewhere, Micron Technology, Inc. (NASDAQ: MU ) hit a new all-time high after KeyBank played up robust DRAM pricing, while Alibaba Group Holding Ltd (NYSE: BABA ) attracted more call traders following bullish comments from Fund manager Tony Mitchel.

Bank of America Corp (BAC)

BAC stock bulls got exactly what they wanted with yesterday's Fed announcement on monetary policy, the promise of more interest rate hikes. With trading income falling sharply , Bank of America could sorely use the increased investment income that such rate hikes would bring. BAC bulls attempted to push the shares past resistance at $25 following the Fed's decision, yet the shares were all but pinned in the region.

This morning, BAC is retreating as the rest of the market consolidates its recent run into all-time high territory.

Naturally, options traders flooded BAC with calls on Wednesday, attempting to ride a Fed-driven rally. Volume rose to 447,000 contracts, with calls making up 65% of the day's take. However, not all of those call options were bullish in nature.

In fact, according to data from Trade-Alert.com, several traders were in a selling mood. Specifically, several large blocks of out-of-the-money BAC calls were sold yesterday, including a block of roughly 39,200 contracts at the Nov. $27 strike.

Remember, stockholders will sell call options as a way to hedge underperformance in their holdings, meaning that yesterday's BAC options activity may well have been portfolio hedging against near-term weakness.

Micron Technology, Inc. (MU)

KeyBank came out yesterday to praise Micron's potential for continued growth. According the KeyBank analyst , DRAM memory pricing dynamics are "robust" and prices are expected to rise through the end of the year - directly benefitting Micron. The brokerage firm reiterated its $42 price target on MU stock and even held its "sector weight" stance due to increased DRAM capacity from Samsung Electronics and SK Hynix - a concern that Evercore ISI recently said was overblown .

MU stock briefly tagged a fresh all-time high following KeyBank's praise, and options traders responded bullishly to the renewed push higher. Volume jumped to 241,000 contracts, doubling MU's daily average, while calls made up a hefty 74% of the day's take.

As a result of MU's rally this week, the shares are now trading above peak October call open interest of 90,000 contracts at $35. With earnings slated to arrive early next week, MU call traders may be adjusting their targets higher in response to the recent rally.

Alibaba Group Holding Ltd (BABA)

I've said before that I believe that BABA stock has considerable upside over the next few years, and now fund managers are jumping on board the Alibaba bull train. Yesterday, leading internet fund manager Tony Mitchel said that BABA is now his second-largest holding and that he favors the stock over Amazon.com, Inc. (NASDAQ: AMZN ).

Mitchel said he believes BABA stock could double in the next three years, noting that "Amazon is trading at a P/E of 245, while Alibaba is trading at a P/E of 62, and while both have rich valuations, even if you discount Alibaba for its Geo-Political risk at 50%, it would still need to double to reach the valuation of Amazon."

BABA stock dipped on Wednesday, however, as traders digested the stock's latest run at resistance in the $180 region. Options traders didn't shy away, however, as calls made up 63% of the more than 121,000 contracts traded on BABA yesterday.

The shares are now trading well north of heavy October call OI at the $170 and $175 areas, with only moderate accumulations at $180 and $185. In short, there is little in the way of potential options related resistance north of BABA's current perch. While geopolitical concerns remain, especially with North Korea, BABA's path remains higher, and options traders will have to readjust sooner or later.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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The post Thursday's Vital Data: Bank of America Corp (BAC), Micron Technology, Inc. (MU) and Alibaba Group Holding Ltd (BABA) appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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