I’ve said before that the biggest potential market mover right now is interest rates. And I’ve been warning my readers off of highly touted tech stocks, because the tech sector is could be the most negatively impacted by a rate hike.
Some analysts have even predicted that the Nasdaq could fall by as much as 20% if we see the 10-year Treasury Yield hit 2%.
On Friday, the 10-year soared as high as 1.63, sending the Nasdaq down again after its brief rally this week.
Even with the new stimulus checks set to hit the market soon, tech stocks could be a risky play right now.
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Trading tip of the week
When I trade earnings, I could care less what the top or bottom line is.
I care more about how the stock will respond.
So, I look like at the what is on the earnings call, and what the stock has done over the last 8 quarters.
Does the stock usually rally? Sell-off? Determining the market’s reaction to earnings is so much more important.
Earnings report to watch
General Mills, Inc. (GIS) – the popular food manufacturer known best for its cereal brands – is one that I have a positive outlook on for its upcoming earnings report on March 24.
Given the earnings beats the stock has experienced over the last two quarters and the market’s positive reaction, I believe more good things are in store.
If you’re looking for a great way to play it, I’d advise buying an out-of-the-money call spread in March. Look for a spread that is 25% of the price of the bid/ask spread that gives you a 3:1 reward to risk setup.