Investors of ConocoPhillips (COP) have kept the share prices range bound ahead of the company's fiscal second quarter earnings announcement. At first glance, it seems that option traders are positioned for a positive move, as there are a growing number of 澳洲幸运5官方开奖结果体彩网:call options in the 澳洲幸运5官方开奖结果体彩网:open interest. The unusual option trading may create a strong upward trend in the price action if COP delivers a positive earnings su𝔍r𝕴prise.

A growing number of call options remain the open interest for COP, and 澳洲幸运5官方开奖结果体彩网:option premiums are unusually elevated right now. Trading volumes indicate that traders have been buying calls and selling puts in a🙈nticipation of a positive earnings report. If these bets were to unwind, it could result in unforeseen downward pressure on the share price of ConocoPhillips.

Accurately predicting the direction a stock will move following earnings is difficult. However, a comparison of the stock's price action and option trading activity shows that, if COP delivers a negative report, the company's share price could fall significantly, moving further below its 20-day 澳洲幸运5官方开奖结果体彩网:moving average after the announcement. This is possible because options are priced for an upwards move, but unexpected poor news co💙uld catch traders off guard and create a swift decline in share price.

By comparing the details of both stock price and option behavior, chart watchers can gaไin valuable insight, although it is imperative to understand the context in which this price behavior took place. The chart below depicts the price action for COP shares as of July 30. This created the setup leading into the earnings announcement.

Current Trends

The one-month trend of COP stock has the shares in the middle of the volatility range, falling below the 20-day moving average. Over this time period, the lowest COP share price was roughly $52 in mid-July, whereas the highest share price was nearly $63 in early July. The price closed in the middle region depicted by the technical 🔥studies on this chart.

The studies are formed by 20-day 澳洲幸运5官方开奖结果体彩网:Keltner Channel indicators. These depict price levels that represent a multiple of the 澳洲幸运5官方开奖结果体彩网:Average True Range (ATR) for the stock. This array helps to highlight the way the price has risen to a middle range in the week before earni🐷ngs. This price move from COP shares implies that investors expect a negative earnings result.

In this context where the price trend for COP has remained in an average range but has recently risen toward the 20-day moving average, chart watchers can recognize that traders and investors are expressing optimism going into earnings. However, it is notable that, in the week before earnings, COP's share price has been gradually climbing, moving closer to the 20-day moving average a few days before the report. That makes it important for chart watchers to determine whether the move is reflecting investors' expectations for favorable earnings or not.

Option trading details can provide additional context to assist chart watchers in forming an opinion about investor expectations. Recently, option traders are favoring calls over puts. Normally, this volume suggests that investors are expec🍨ting a positive earnings report.

Trading Activity

Option traders recognize that COP shares are average and have priced their options as a bet that the stock will close within one of the two boxes depicted in the ch♏art between today and Aug. 6, the Friday after the earnings report is released. The green-framed box represents the pricing that call option sellers are offering. It implies a 40% chance that COP shares will close inside this range by the end of the week if prices go higher. The red box represented the pricing for put options with a 35% probability if prices go lower on the announcement.

It's important to note that the open interest featured nearly 192,000 active call options compared to roughly 153,000 put options, demonstrating the bias that option buyers had, as the majority of the trades were call options. This amount normally implies that call option traders expect a rise in price. It is important to note, however, that implied volatility has been falling for put options but rising for calls, signaling that traders are selling puts and buying calls. Because the call box and put box are relatively equal in size, it tells us that the higher percentage of ༒put options traded has only mildly skewed expectations lower. A far more complacent outlook is implied.

The purple lines on the chart are generated by a 10-day Keltner Channel study set at four times the ATR. This measure tends to create highly correlated regions of strong 澳洲幸运5官方开奖结果体彩网:support and resistance in the price action. These regions show up when the channel l🤪ines make a noticeable turn within the previous three months.

The levels that the turns mark are annotated in the chart below. What is notable in this chart is that the call and put pricing are in such a close range with plenty of space to run either downwards or upwards. This suggests that option buyers don't have a strong conviction about how the company will report, even though call are being purchased over puts. Although investors and option traders do not expect it, a surprising report could push prices dramatically higher or lower.

These support and resistance levels show a large range of support and resistance for prices. As a result, it is possible that any news, surprisingly bad or good, will catch investors by surprise and could generate an unusually lar🏅ge move. After the previous earnings announcement, COP shares rose by 5.5% the day of earnings and continued to rise the following week. Investors may be expecting a similar move in the price after this announcement. With plenty of room in the volatility range, share prices could rise or fall more than expected.

Market Impact

COP shares typically make significant moves after earnings, so the results may have a direct impact on indexes. However, no matter what the report says, it will likely affect stocks in the energy sector. A positive report could lift other stocks in the sector such as Chevron Corporation (CVX), BP p.l.c. (BP), or TotalEnergies SE (TTE). It could also affect 澳洲幸运5官方开奖结果体彩网:exchange traded funds (ETFs) such as State Street's Energy Sector ETF (XLE) or iShares' U.S. Oil & Gas Exploration & Production ETF (IEO).