TradingTips.com

TradingTips.com

European Central Bank Hints at Stimulus

Posted: 19 Jun 2019 03:00 AM PDT

Europe’s central bank hints at more stimulus; stocks rally

Stock futures rose, and markets had one of their best days of the year on Tuesday, following news out of Europe.

Mario Draghi, head of the European Central Bank (ECB), hinted that the bank would be likely to cut interest rates and start re-purchasing assets in the coming months to stimulate economic growth. These purchases would be similar to the quantitative easing (QE) done by the Federal Reserve in the past.

The comments came at a conference in Portugal, where Draghi pointed out that Eurozone growth is low, and inflation expectations remain muted.

Recent inflation for the Eurozone suggests about a 1.2 percent change per year, down from 1.7 percent expectations in April.

The goal behind the stimulus would be to increase growth, without pushing inflation too high. The ECB is currently targeting inflation rates of 2 percent per year, also in line with the U.S. Federal Reserve.

Drahi has recently hinted in prior months that the Eurozone economy faces more downside risks than upside right now.

The comments came hours ahead of a Fed meeting, which could lead to a change in interest rates. Like the ECB, the Fed has likewise hinted recently that more stimulus may be on the way.

Insider Activity: Encana Corp (ECA)

Posted: 19 Jun 2019 03:00 AM PDT

CEO, director continue to buy shares as oil languishes.

Insiders have already been buying at oil and gas exploration firm Encana (ECA), but continue to pick up shares near current prices.

On June 14th, CEO Douglas Suttles picked up 5,000 more shares of the company. And on Monday, June 17th, director Suzanne Nimocks picked up 10,000 shares.

This ongoing type of buy is a pro move. Most individual investors can buy a stake in a company with one buy order. But making repeated buys, particularly at this size, ensures that the market price for shares stays stable.

The timing looks solid in the short-term as well. Oil prices surged higher on Tuesday, on favorable market conditions. Higher oil prices will certainly help the company improve profitability. With the company still digesting its large acquisition last year, shares look undervalued at current prices relative to the company's future prospects.

Action to take: Shares of Encana are increasingly looking like an attractive bet based on its valuation, the unseasonal low oil prices right now, and its future prospects. The added insider buying should pay off in time.

Investors who can stomach the volatility should look to buy shares of Encana under $5 per share. At these prices, shares make more sense than an option, which will likely bleed out time premium.

Facebook Unveils Crypto Plans

Posted: 19 Jun 2019 03:00 AM PDT

Social media company looks to enter money and payment space.

Social media giant Facebook (FB) released plans for its cryptocurrency on Tuesday. Called Libra, the open-source digital currency is set to launch in the first half of 2020.

The currency will allow customers to send money around the world at no cost. Libra members include Visa and PayPal, among other payments companies, and already has support of tech companies like Lyft and Uber.

While Facebook announced the development of the currency—and has been hinting at it for months—the actual management of Libra will be by a non-profit association. Facebook will launch a new subsidiary, Calibra, which will run digital wallets and should allow Facebook to profit from the growth and use of Libra.

Facebook claims that having separate divisions will prevent the digital wallet from being used for ad targeting on the traditional Facebook platform. With the company still dealing with the fallout from its privacy breaches in the past year, however, some remain skeptical.

The question that remains is whether or not users will accept the currency. With plenty of options in traditional and cryptocurrencies for exchanging money in a low-to-no cost way, some skepticism remains.

Action to take: Given the reach of the Facebook platform, even a modest success could be huge for the company. This could give the shares the push they need after last year's privacy concerns. Shares are a buy up to $190. Shares were muted on Tuesday despite a big market rally.

Unusual Options Activity: Alibaba Group (BABA)

Posted: 19 Jun 2019 03:00 AM PDT

Traders bet on Chinese e-commerce giant ahead of G20 meeting.

A large bet is being made that shares of Alibaba Group (BABA) will jump about 5 percent higher in the next month.

On Tuesday, over 5,300 of the July $175 call options options had been traded, against an open interest of 133 options. This bet, with shares currently at $168, implies that shares will move higher by around 5 percent within the next month.

The trade is most likely a way for traders to bet on a favorable outcome (or at least favorable comments now) regarding trade between China and the United States.

With Presidents Xi and Trump set to meet later in the week on trade, any bullish comments could send shares of Chinese companies like Alibaba surging higher, causing these options to move in-the-money.

Action to take: For $2.75, or $275 per contract, this is a nice way to bet on favorable news. That type of news tends to be short-lived, however, and any rally in stocks from trade news one day is likely to decline for unfavorable comments on trade the next.

Traders looking to bet on a favorable outcome on trade may want to look farther out on the options side, such as a January 2020 $175 call on Alibaba instead.
Posted by: at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)