Time frame price perspective
- K experienced heavy call volume Monday
- Stock has been rangebound most of this year
- October lows tested longer-term support
A day after Kellanova (K) put up some sizable numbers on the LiveAction scan for unusual call options activity, traders looking at the food company’s stock action may have come to very different conclusions, depending on the time frame they were consulting.
On Tuesday morning, K was drifting to the downside, along with the broad market. The daily chart below shows the stock has been in a trading range since early January, swinging roughly between $52.50-$58.25. Most recently, shares pulled back to the approximate midpoint of that range:
Source: Power E*TRADE (For illustration purposes. Not a recommendation.)
Given the stock only recently began to reverse a 16-month correction that dropped shares to a nearly 14-year low last October, a seat-of-the-pants take on this chart could be that K, having met resistance at the top of the range, was headed toward a test of its bottom.
That could be the case, but even if it is, the stock’s monthly chart may have given some traders second thoughts, at least in terms of its longer-term price action:
Source: Power E*TRADE (For illustration purposes. Not a recommendation.)
In this chart, the sell-off to below $48 last October appears to be a successful test of the 2019 lows, with the stock still roughly 13% above those levels, despite the recent pullback. A trader looking at this chart could reasonably wonder whether shares had the potential to, eventually, challenge past highs in the $65-$70 range.
And it’s also possible the only traders weighing these perspectives were the ones who saw volume of 5,400 in the May $57.50 calls on Monday, making it (by far) the contract with the highest open interest (OI) among the three nearest monthly expirations.
Market Mover Update: Gold has made headlines while hitting record closing or intraday highs on 13 of the past 15 trading days, but silver and copper have been right there with it—or a little ahead:
Source: Power E*TRADE (For illustration purposes. Not a recommendation.)
As of Tuesday, June gold futures’ (GCM4) year-to-date return was sitting between that of May silver futures (SIK4) and May copper futures (HGK4). Copper, which has been neck and neck with gold since early February—and is trading at its highest levels since June 2022—was the subject of Morgan Stanley analysis highlighting potential supply deficits this year.1
With three more days until expiration, the Eversource Energy (ES) April $60 straddle is trading around $2.85, up from $2.50 on April 4 (see “Breaking down a straddle”).
Today’s numbers include (all times ET): mortgage applications (7 a.m.), Atlanta Fed Business Inflation Expectations (10 a.m.), EIA Petroleum Status Report (10:30 a.m.), Beige Book (2 p.m.).
Today’s earnings include: Abbott Labs (ABT), Travelers (TRV), US Bancorp (USB), Alcoa (AA), CSX (CSX), Discover Financial (DFS), Kinder Morgan (KMI), Wintrust (WTFC).
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1 MorganStanley.com. 5 Unexpected Investment Ideas for 2024. 1/31/24.