Big Tech AI Boom: $GOOGL $META Setup Alerts | Oct 30 Live Trading

Here's a comprehensive summary of the YouTube video transcript, maintaining the original language and technical precision:

Key Concepts:

• Market Performance: NASDAQ trading lower, with specific tech giants like Microsoft, Meta, and Google reporting earnings.
• Big Tech Earnings:
  • Google (Alphabet): Strong upside, up significantly on monster earnings, exceeding revenue and EPS expectations. Cloud backlog of $155 billion due to chip shortages. AI search numbers ticking higher.
  • Meta Platforms: Shares dropped aggressively due to a nearly $16 billion one-time tax charge, despite beating top and bottom-line estimates. Capex guidance increased. Daily active users strong.
  • Microsoft: Reported good earnings, beating EPS and revenue estimates. Reaffirmed exclusive compute partnership with OpenAI. Capital expenditures to accelerate for AI infrastructure demand.
• Federal Reserve Policy: Powell's comments indicating no preset course and that a December rate cut is not a foregone conclusion, leading to market sell-off. Fed watch tool shows a 69% chance of a December rate cut.
• Economic Data: Canadian payroll employment in August reported.
• Small Cap Trading: Focus on hot sectors, gap-ups, and specific trading strategies for sub-dollar tickers and rare earths.
• IPO Market: NAVN, a corporate travel and expense company, IPOing today.
• Options Activity: Discussion of SPY, Qs, and IWM options, with specific focus on Google's options activity.
• Retail Sector Weakness: Chipotle and Starbucks earnings showing weakness, with Chipotle making new lows.
• Cryptocurrency: Bitcoin trading lower, below $110,000, and approaching support at $108,000. IBIT also discussed as a potential short.
• Geopolitical/Trade: Discussion of the US-China meeting, with no specific new deal on chips. TikTok situation also mentioned.
• Blue Jays: One win away from the World Series.

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Market Overview and Big Tech Earnings

The market is currently experiencing downside pressure, with the NASDAQ trading back to session lows. This comes after significant earnings reports from major tech companies, including Microsoft, Meta, and Google.

• Google (Alphabet) saw a substantial upside move, trading up as much as 9% at its highs following a "monster" earnings report. Analysts have an average price target suggesting a further 22% upside. Google's Q3 revenue was $102.03 billion, beating estimates of $99.89 billion. EPS was $3.10, exceeding the expected $2.33. Net income was nearly $35 billion, up from $26.3 billion year-over-year, despite a $3.5 billion EU antitrust fine. Advertising revenue reached $74.18 billion, up from $65.85 billion. YouTube ad sales were $10.4 billion. Google Cloud, the fastest-growing cloud service among the top three, reported $15.15 billion in revenue, up 35% year-over-year, with a backlog of $155 billion due to chip shortages. Notably, AI search numbers have been ticking higher for the second consecutive quarter, countering concerns about AI negatively impacting search revenue. The stock is seen as a potential buy on dips, with a target of $300.
• Meta Platforms experienced an aggressive sell-off, dropping nearly 10% after hours. This was primarily attributed to a nearly $16 billion one-time tax charge, which offset strong top and bottom-line beats. Q3 revenue was $51.4 billion, beating expectations of $49.5 billion, and EPS was $7.25, ahead of the $6.69 estimate. Despite the tax charge, Meta stated that the "big beautiful bill" will reduce US cash tax payments in 2025 and beyond. Q3 revenue grew 26% year-over-year. The company guided Q4 revenue between $56 billion and $59 billion, above the midpoint. Total 2025 expenses are projected to be between $116 billion and $118 billion, an increase from previous guidance. Daily active users across all apps reached 3.54 billion, with advertising revenue just shy of $50.1 billion. The stock is threatening to break below the 200-period moving average, with potential downside to the $620 level.
• Microsoft also reported good earnings, with Q1 EPS at $3.72, beating the $3.67 estimate, and revenue of $77.67 billion, ahead of the $75.33 billion expected. Revenue was up 18% year-over-year. The company recorded a one-time $3.1 billion hit to net income related to its OpenAI investment. Microsoft reaffirmed its exclusive compute partnership with OpenAI, which recently completed a $130 billion restructuring granting Microsoft a 27% stake valued at $135 billion. OpenAI is reportedly preparing for an IPO next year with a potential valuation of $1 trillion. Microsoft's CFO indicated that capital expenditures will accelerate this fiscal year to meet AI infrastructure demand, which did not please the market, despite the strong report. The stock is down 2.8% in pre-market trading.

Federal Reserve and Economic Commentary

Jerome Powell's comments yesterday indicated that the Federal Reserve has no preset course and that a December rate cut is not a foregone conclusion. This led to a market sell-off. The CME Fed Watch tool currently shows a 69% chance of a December rate cut, down from previous highs. Canadian payroll employment in August was reported at 3.3 versus 21.6 positive.

Small Cap and IPO Market Insights

The small cap space continues to offer trading opportunities. Luis Barbado highlighted the importance of being aware of hot sectors, such as rare earths, due to ongoing negotiations with China.

• CMBBM: Discussed as a "crazy stock" with a strong gap-up setup for day traders. Yesterday's play involved reclaiming the VWAP and closing over pre-market highs for a runner. Today's play is different, with a potential short if it loses volume and breaks below $5.55.
• ARBB: A low-float stock that ran up to $10 after the close but has since given back gains. It's considered not interesting due to its current trading range and lack of historical volume.
• MP Materials: A rare earths company gapping higher, coming into resistance. Trading rare earth sectors involves playing the hottest stock or sympathy plays.
• INTS: Gapping up 200% with significant pre-market volume. As a sub-dollar ticker, it's crucial to check its compliance with NASDAQ rules regarding closing above $1. The expectation is a push towards $1, with a potential short if it fails to hold.
• VCIG: A $4 stock with a 1 million float, considered to have a high probability of dilution, making it a potential short.
• NAVN: The IPO for this corporate travel and expense company is expected to price at $25. It's a NASDAQ stock, and its opening print is being watched closely.

Options Activity and Market Sentiment

Joe provided insights into options activity, noting substantial open interest on SPY, Qs, and IWM. Google's options activity shows substantial open interest and high volume for tomorrow's expiration cycle. The at-the-money IV for Google is around 109%.

Retail Sector Performance

The retail sector is showing weakness.

• Chipotle: Down 18.5%, making new lows. The report was considered bad, and the stock has been struggling since the departure of Brian Nickel.
• Starbucks: Initially down, but battling back. The company beat on the top line but missed on the bottom line. Global same-store sales rose 1%, with US comps turning positive in September and October. The "green apron service" program is boosting speed. China same-store sales rose 2%, but average spending declined. The company closed 627 stores, expecting margin improvement.
• Lululemon and McDonald's: Mentioned as other retail names with mixed performance.

Other Notable Mentions

• Blue Jays: One win away from the World Series.
• Bitcoin: Trading below $108,000, with a potential short opportunity if it fades.
• Nvidia: Briefly fell below $5 trillion in market cap.
• Tesla: Facing delays in completing paperwork for robo-taxi rides in Arizona and Nevada.
• TikTok: The situation with the US and China is ongoing.
• IBIT: Discussed as a potential short, with levels around $62-$62.50.
• Critical Metals (CRML): Mentioned as a potential long at $12-$12.15.
• Palantir (PLTR): Trading around $196-$197, with a potential short at $200 and a long opportunity if it breaks $200.
• Silver and Gold: Silver is showing strength and a clean breakout, preferred for day trading over gold. Gold is also making moves higher.
• Oracle: Down 4%, with the gap from its previous guidance related to OpenAI unwinding.
• Broadcom and AMD: Mentioned as being pulled down by Nvidia's performance.
• Core Scientific (CORZ): Merger termination with CoreWeave is not significantly impacting the stock.
• Marvell: Showing volatility, with a 10% move in four days.
• JP Morgan: Showing a strong move back up, with a target of $310.
• Goldman Sachs: Expected to benefit from any talk of an OpenAI deal.
• Wells Fargo (WFC): Restriction lifted, leading to a 7% move on earnings day.
• Lumen Technologies (LUMN): Reporting earnings tonight, with a recent tie-up with Palantir.
• DJT: Prediction markets suggest a "pump and dump," with a key level at $15.
• Eli Lilly: Showing a strong move up after earnings, with 10 consecutive green candles.
• SoFi: Considered a potential dip-buy opportunity, especially for those looking to increase financial exposure.
• CVU (CPI Aerostructures): Awarded a contract for structural assemblies by Raytheon Missiles and Defense.
• INTS (Intensity Therapeutics): Clinical results published in eBioMedicine.
• CMBBM (Cambi): Integrating its platform with Starlink.
• US Dollar: Continuing its uptrend, breaking previous resistance levels.
• Fed Chair Succession: Hasset and Waller are leading candidates according to betting markets, with Powell not being a strong contender.
• Government Shutdown: Day 30 of the shutdown, with hopes for resolution within two weeks.
• Hurricane Fiona: Mentioned in relation to Puerto Rico.

Trading Strategies and Takeaways

• Patience and Levels: Emphasized throughout the discussion, with traders advised to wait for specific levels and not force trades.
• Risk Management: Taking profits on winners and cutting losses quickly on losers is crucial.
• Mean Reversion: A common strategy, especially at market lows.
• Trend Following: Identifying and trading with established trends, whether up or down.
• Sector Rotation: Being aware of hot sectors and their potential for sympathy plays.
• Community Input: The chat community provides valuable ideas and insights, helping traders identify opportunities.
• "Ball Don't Lie": The market's price action ultimately dictates the outcome, regardless of fundamental analysis.
• "Short the Pops": A strategy to fade rallies, especially in a down-trending market.

Conclusion

The market is navigating a complex landscape of big tech earnings, Federal Reserve policy signals, and geopolitical developments. While some sectors like tech are showing weakness, others like financials and healthcare are performing strongly. Traders are employing various strategies, from shorting pops to buying dips, with an emphasis on patience, risk management, and community collaboration. The day has seen significant volatility and opportunities across different asset classes.