Welcome to Michael Kramer’s pick of the top three market events to look out for in the week ahead.
The final week of June looks light on macroeconomic data, though the US personal consumption expenditures (PCE) price index data for May could have a bearing on US interest rates and, by extension, dollar pairs. Meanwhile, the latest earnings announcements from Micron [NASDAQ: MU] and Nike [NYSE: NKE] also stand out. Micron’s results represent an opportunity for investors to assess whether demand for AI components is broadening out, while Nike’s results should offer insights into the strength of US and Chinese consumers.
Micron Technology Q3 results
Wednesday 26 June
Analysts estimate that Micron, which is set to report fiscal third-quarter 2024 results after the close of trading on Wednesday, will report earnings of $0.50 a share, up from a loss of $1.43 a share in the year-ago period. Revenue in Q3 is expected to have grown 77.5% year-on-year to around $6.7bn, while adjusted gross margin is forecast to have expanded to 27.3%, up from 20% in the previous quarter.
Currently, the market expects a roughly 12% move in the stock after the results. This means the share price, up 13% in the past month at $144.19 as of Thursday’s close, could move within the $127 to $162 range. The expected trading range is wide because the implied volatility levels in the options expiring on 28 June are over 110%, making the option premiums expensive. Additionally, most of the option positioning in the stock is for further upside, based on call delta and call gamma values, with the strike price at $155 serving as resistance. This means that a move above $155 could send the stock sharply higher, while a failure to push beyond $155 could result in many sellers entering the market.
Technically, the stock has a bump-and-run pattern, which suggests that the next potential move in the shares could be lower. A break of support around $140 would likely set up a steeper drop to $130 and potentially a near-term move back to the gap at $115.
Nike Q4 results
Thursday 27 June
Nike is expected to report after markets close that its Q4 earnings grew 14.3% year-on-year to $3.69 a share, with revenue up less than 1% year-on-year at $51.6bn. Gross margin is expected to improve to 44.8%, up from 43.5% last quarter.
As for the shares, which had risen 3% in the past month to $95.57 by Thursday’s close, the market expects an implied move of just 6.8% following the results. Option positioning appears to be more bearish for Nike, with significant levels of gamma built up around $83 and $84 a share. This suggests that Nike may be more likely to move higher following the results as implied volatility levels and gamma values decline, as long as the stock doesn’t drop below $84.
Nike’s technical chart, shown below, reveals that although the stock has trended lower since late-2022, it has found support at around $88 on several occasions. If the stock can break this year’s downtrend by rising above the $96 area, it could make a substantial move higher, especially as implied volatility levels fall and put holders are impelled to sell. This could result in the stock filling a gap at around $101. Additionally, the relative strength index (RSI) is rising towards a reading of 60, a bullish signal.
Nike share price, October 2021-present
