The Daily Breakdown takes a closer look at what to watch this week, including escalating tensions in the Middle East and the Fed meeting.
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Monday’s TLDR
- The Fed is in focus
- So is Friday’s options expiration
- ROKU, CRCL lead morning gains
Weekly Outlook
Despite a quiet earnings calendar, this week could still be impactful — especially with a market holiday on Thursday. Here are three key things I’m watching:
First, how will markets respond to rising tension in the Middle East? Gold and oil surged while stocks sold off Friday. Those moves aren’t intensifying in pre-market trade, but will investors shift back to a risk-on mindset?
Second, what will the Fed say on Wednesday?
While Tuesday’s retail sales report offers insight into consumer health, the Fed’s stance on inflation and rates could shape the summer narrative. Inflation hasn’t spiked, and while the job market remains solid, it’s starting to show some cracks. No rate cut is expected this week, but investors will be watching Chair Powell closely.
Third, what will Friday look like?
Markets are closed Thursday for Juneteenth. Normally, that would mean a quiet Friday, but this week brings the June options expiration and a triple-witching event — remember, the latter is when stock index options (like the S&P 500, or SPX), equity options (like the SPY ETF), and equity futures (like the S&P 500 futures, or ES) all expire.
That could spark volatility in an otherwise slow stretch and elevate trading volumes into the weekend.
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The Setup — Oracle
Markets may have been down on Friday, but not Oracle. Shares rose 7.7% on the day, building on Thursday’s 13.3% rally. In all, ORCL rose more than 20% last week, hitting record highs on the back of strong earnings as investors embrace the company’s cloud- and AI-forward initiatives.
These businesses are powering what analysts believe will be double-digit earnings and revenue growth, but it’s coming at a price: Oracle’s forward P/E ratio is now at a 10-year high.
While the valuation is one focus, the charts are another.
Notice the breakout to record highs, as ORCL broke through the $190 to $200 area that was previously resistance. From here, bulls want to see this former area of resistance turn into support.
If that happens and growth expectations remain strong, a stock has the potential to keep trading well even when the valuation appears stretched. When this happens, some investors might say something like “Oracle has earned a premium valuation.”
However, if support doesn’t hold on a pullback, more selling pressure could ensue. Likewise, some investors may view ORCL as overvalued and feel compelled to avoid or even short the stock.
Options
On a dip, buying calls or call spreads may be one way to take advantage of a pullback. For call buyers, it may be advantageous to have adequate time until the option’s expiration.
For those that aren’t feeling so bullish or who are looking for a deeper pullback, puts or put spreads could be one way to take advantage.
To learn more about options, consider visiting the eToro Academy.
What Wall Street is Watching
Friday’s market drop didn’t dampen enthusiasm for Circle, as shares rose more than 25%. The rally is set to continue this morning, with the stock up nearly 10% in pre-market trading. Circle initially priced its IPO at $31 per share but opened at $69 and closed Friday at $133.56 — a strong display of post-IPO momentum. Check out the chart for Circle.
Shares of Roku are in focus this morning, rallying in pre-market trading on news that it’s partnered with Amazon. Connected TV (CTV) advertising continues to be a key growth avenue for online ad platforms and investors are hoping this acts as a positive catalyst for Roku.
Despite last week’s volatility, Bitcoin again held up above the key $100,000 level. Now trading above the weekend highs, investors are wondering if BTC can help lead the risk-on trade for both stocks and crypto. Remember, eToro now offers crypto trading on more than just BTC, ETH and Bitcoin Cash. Find more on the Crypto Discovery page.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.