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XAutoplay: On | Off Major stock indexes showed modest gains in afternoon trading Wednesday ahead of the release of the minutes from the May 2-3 Fed meeting at 2 p.m. ET.
The market is expecting another rate hike at the June meeting, but Wall Street could get more color on the Fed’s plans to shrink its $4.5 trillion balance sheet. Liquidating holdings would be another form of a rate hike.
The Dow Jones industrial average, S&P 500 and Nasdaq composite were up by 0.1% to 0.2%. Volume on the Nasdaq in the stock market today was tracking about 10% lower than Tuesday’s level. NYSE volume was tracking close to Tuesday.
Western Digital (WDC) was a solid gainer in the Nasdaq 100, up nearly 3%, after published reports said the company offered to buy Toshiba’s chip unit for $17.8 billion. Western Digital is testing support at the 10-week moving average for the first time after a base breakout in late March.
Oil eased 0.5% to $51.21 a barrel Wednesday despite data from the Energy Information Administration showing the seventh straight weekly drop in U.S. crude supplies. That news was offset by a recommendation by a joint OPEC and non-OPEC committee on Wednesday to extend output cuts agreed upon in December for nine months.
Inside the IBD 50, Stamps.com (STMP) continued work on the right side of a cup-shaped base as shares jumped 5%. It reset its base count last year when shares hit a low of 68.82 in July. That means its current base is first stage.
Also in the IBD 50, China-based YY (YY) also outperformed, rising 3%. It’s still in buy range from a 56.31 cup-with-handle buy point, although a lagging relative strength line raises some concern about the viability of the breakout.
Ulta Beauty (ULTA) gave up its 50-day moving average ahead of its earnings report Thursday after the close. Shares slumped nearly 4% after Edward Jones downgraded the beauty retailer to hold from buy.
Chipmaker Marvell Technology Group (MRVL) also reports Thursday after the close. Despite several quarters in a row of declining sales, it’s a reasonable candidate for a call-option trade ahead of earnings as it works on a base with a 16.82 buy point.
When shares were trading around 16.25, a weekly call option with a 16.50 strike price (May 26 expiration) came with a premium of 50 cents, offering a trade with downside risk of just 3%. The right, but not the obligation, to buy 100 shares of Marvell at 16.50 came at a cost of just $50. You can learn more about IBD’s option strategy to use around earnings here.