Market Direction and Stock Trends

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General Electric Heads Toward Worst Week Since 2009 Stock Market Bottom
By Schaeffer's Investment Research | January 19, 2018

GE will report earnings ahead of the open next Wednesday, Jan. 24

VRX is pacing for its biggest weekly loss since last August

It's a mixed session on Wall Street today, as traders await updates on the budget showdown in D.C. Among individual stocks making notable moves are embattled blue chip General Electric Company (NYSE:GE), pharmaceutical firm Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN). Here's a quick look at what's moving shares of GE, VRX, and AMZN.

GE STOCK HIT A SEVEN-YEAR LOW AHEAD OF EARNINGS

General Electric stock is down 2.7% to trade at $16.32, fresh off a seven-year low of $16.02, on track to extend its daily losing streak to five, and pacing for its worst week since March 2009 -- the same week of the stock market bottom. Sparking this week's sell-off was GE's early morning announcement on Tuesday it would incur a more than $11 billion charge from its long-term care insurance portfolio, as well as the new U.S. tax code, which spurred breakup talk from CEO John Flannery.

The Dow component will continue to be in focus next week, with fourth-quarter earnings due before the market opens on Wednesday, Jan. 24. GE stock has closed lower in the session after reporting in seven of the past eight quarters, and another negative earnings reaction could draw bearish brokerage notes. Of the 12 analysts covering General Electric, five still maintain a "buy" or "strong buy" recommendation, while the average 12-month price target of $21.71 stands at a 33.1% premium to current trading levels.

VRX STOCK PACING FOR FOURTH STRAIGHT LOSS ON COMPETITION CONCERNS

Valeant Pharmaceuticals stock is down 3.1% to trade at $21.41, after Wells Fargo and Cantor Fitzgerald expressed caution over potential competition for the drugmaker's diarrhea drug, Xifaxan, from a similar treatment being developed by Cosmo Pharma. However, the latter brokerage firm said sales from the rival drug would be insignificant, relative to VRX, and didn't see any "fundamental reasons for the stock's weakness."

Today's retreat extends the stock's recent retreat from its early January 12-month high at $24.43, with VRX on track for its fourth straight loss, and its worst week since August. Nevertheless, the security appears to be finding a foothold near $21 -- home to its rising 30-day moving average, and a 23.6% Fibonacci retracement of its November-to-January rally.

Those wanting to bet on the stock's next move are in luck. Valeant's Schaeffer's Volatility Index (SVI) of 51% ranks in the 15th annual percentile, suggesting short-term options are pricing in low volatility expectations at the moment. Plus, the equity's Schaeffer's Volatility Scorecard (SVS) is perched at 100, meaning VRX stock has made big moves over the last year, relative to what the options market has expected -- a potential boon to premium buyers.

AMAZON HIKES MONTHLY PRIME RATE

Amazon is raising its prices for monthly Prime members by $2 to $12.99 -- the first time in almost four years it's done so -- though the rate for an annual plan will remain unchanged. AMZN is trading up 0.6% at $1,300.89, though the FAANG stock remains on track to snap its three-week win streak.

More broadly, Amazon shares have surged 60.8% on a year-over-year basis, and topped out at a record high $1,339.94 on Jan. 16, thanks to some positive analyst attention. Options traders have been betting on more upside, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMZN's 10-day call/put volume ratio of 1.22 ranks in the 93rd annual percentile, meaning calls have been bought to open at a quicker-than-usual clip in recent weeks.

https://www.schaeffersresearch.com/content/news/2018/01/19/general-electric-heads-toward-worst-week-since-2009-stock-market-bottom

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(Disclosure: I do not own GE shares)