zblmpblt welcome back. i am brian sullivan, the tome prepping behind us here. while they are doing that, here's what's coming up on the show. >> the stock traders think will be the first to get cut. plus -- ♪ >> pretty much sums up what rates are are doing and you won't believe how much lower the charts say they can go. and talk about a drug deal. >> get down to business.

>> not that kind of drug deal. we're talking about big pharma because one drug stock is showing signs of a breakout. we'll give you the name. the action begins right now. despite the new record, bond, treasuries continue to rally. u.s. tenure yield fell below 1 57b9 5% this week. great for realtor, but how long can bonds and stocks rally together? let geiss get in the money and find out. >> take a look at this. you get the gdp data we got and that's going reassure any bond bulls we're not going to get a rate increase anytime soon and you have to assume that every buyer of financial assets is hoping against all hope that anything's going to cut off the nice spigot of money that's been flowing in. i think they got what they

wanted, but what's interesting is that equities could have done a little bit better today on the heels of some big earnings numbers we got and the fact this discounts a future rate increase. >> i'll say that's probably more function of the fact it's a friday at the end of july. i know what mike's saying. typically, we see the s&p at 15 to 20 handles, but the fact it is a friday in july, people traveling might have something to do with it. i will say this. i have been a bond bull for a long time. i thought yields were going down to one and a quarter percent. i thought incorrectically that had to correlate with a stock market that would sell off at some point because to me, the bond weakness means global strength is just not there. the it's meant the exact opposite. >> it's not economic expansion. it's economic exasperation. the headlines are the so-called market, s&p 500, has made a new high. but if the reference point is the prior high, may 20, 2015,

the if one made a choice of stocks, bond, real estate or goal, the worst thing you could have done is be in stocks. stocks were up 2% since may. treasuries give you a total return of 19. real estate, 14. gold, ten. that's the problem. >> may have been the worst place you could be, but still a decent place to be. that's really the thing is that you know, what are you going to do? stuff it under the mattress essentially. >> if if it's up 2%, that's not even keeping up with inflation. equities. >> well, the post deflation rate is keeping up. right now, they're saying there's no inflation. are we going to look back and say, wow, 2015. you're assuming these stocks are not going to go lower and are going to stay at the current level, so to me, you have tremendous market risk. it's been the right arm, by the way, but you have seen days where the stocks themselves have

lost the entire dividend plus some and we might be on the precipi precipice. >> the market doesn't believe the dividends are sustainable if you're seeing yields and dividends in this that relationship. >> you know rates are low, but we've got a chart, carter. shows you think that rates could go longer. >> i think we've got to get long with tlt. treasuries are beating stocks and that's on an on a risk to reward basis. so, i want to start with what we know. that rates are low ayou can recognize the flags. there's the u.s. here's canada. let's keep going. spain at one. great britain at .7. france at basically flat. and now we get into the good stuff.

germany, negative. let's look at the charts of the long-term yield. you could draw your lines anywhere you want. what my eyes is this. we have a low in july and i think we're going down to 12. 11. pick your number. and here's your long-term. we're still this that channel. there is no, there is no sign that we have come out of this well defined, it's responding overand over. you know, if it starts with that, that's tomorrow's lunch. yields stay low. treasuries to outperform. here's our bet. you can draw these lines anywhere you want. that's what my eye sees. take it away, p pit back.

to go again, draw the lines this way. want to play tlt for new highs. back to the lows or lore. >> you would think taking a look at those charts, people think of bonds as basically safe assets. you can see how much the prices have moved around. it's my boind finding the october 150 call spread. spend $2.85 for that. 150 is not a long stretch when you consider the duration. it's obviously very sensitive to another drop. >> again, i've been in camp now for a while in terms of being bullish in bonds, taking yields and go lower. if you're looking for a light in the sand yield wise, i think 1.75% if we're to see ten years reach that area to the upside. then i'd get worried. to carter's point, yields are going down. >> it's where we were pre brexit. that's what took us down. >> upside.

mortgage rates should continue to tick lore. >> now, to big oil. >> which is less big than it was one month ago. >> got big implications for dividends. >> good evening to you. the problem with big oil's earnings is that many of the oil majors aren't bringing in enough cash. the trend has been to flex the balance sheet, but young can that last? exxon, $8.3 billion in the second quarter. cap ex and dividend combined. cash flow, only 4.5 billion. a gap of almost $4 billion financed with debt. problems with this approach of course could arise as we're watching oil prices trend back down. now, raymond james says at $65 or higher, these companies should yen rate enough free cash

flow to fully cover their payouts. at $50, exxon could do it, but probably not the others. at the current level or less, none of them can. currently dividend yields are relatively high. companies are fighting not to touch them, but energy giant conocophillips tut kuyt last year and the question is, who's next. >> thank you. what do you think? >> b p prk, close to a 7 p% yield. you have to ask yourself how sustainable is that yield. obviously, it's within going hire for the wrong reasons. being the stock has been going lore. but you've got to worry about bp. i'll say this about exxon. i think the last thing that exxon mobil will do is to cut their dividend. i think they'll hell and high water before they do it. if you see that, that to me might be the exact. >> i interviewed the ceo of chevron a while back. looked me in the eye that's the reason have bought the stock.

zpl they don't say not on my watch. >> right now, the options market is implying that these names are likely to cut in the same way that conoco did. i mean, you take a look at exxon. implying about a 70% dividend. that's a good sized cut. conoco already down at 24 cents because they cut. bp at 40. a 25% dividend cut there. chevron, also looking at probably a 25 to 30% implied dividend cut. the fact of the matter is once the first one breaks, it kind of opens the door. and it's going to be to your point, exxon's going to be the last one that probably falls in this case. because they have the best access to crede. you know, that doesn't necessarily protect them. if oil prices stay down here, it's not sustainable. >> that's the problem.

>> and the reality is often we know history has told us, when the final guy cut, that's the time. we're just getting into the cutting process and look, energy's relative performers, basically late april and so after that initial thrust off the low, energy stocks, it's just a bad place to be. >> we buy any of these names? >> i don't want any of them. if you're long only, you want to be underweight. >> i think exxon answering the question. when you're looking at whether you want to buy this, you're buying their reserves. exxon has not been replacing their reserves. if they're not buying, why do they want to? >> and the argument for these guys have been great balance sheets. you need to be in energy, these are the places to be. they're not cheap stocks though. $45 oil. exxon at 21.22 times forward earnings in my opinion is not a cheap stock. if anything, it's an expensive stock that might get more expensive if the stock -- >> i know people think oil must go up, doing a lot of work, the

inflation adjusted average price of a barrel of crude over the last 30 years is is about $45 a barrel. zpl this is where oil has wanted to live for 30 years. >> it's not the only issue. you've got downstream and now, they're filling tankers with product so the question is, everybody's saying maybe you should go by the refining businesses, but that's not true if you have a glut of product. they're not using up what was produced for the summer drivering season. >> folk, do you have a question? you can send usz a tweet to at options -- action. just throwing dashes around. just a dash guy. check out the website, options dlrks actions.cnbc.com. some of the news, videos and exclusive trades. in the meantime, here's what's coming up next. >> lift off. >> that's what drug stocks have done. and one is showing signs of even

more gains to come. we'll explain. plus, calling all option action fans. reach for your phone. think nice thoughts. and send us a tweet to at options action. we'll answer it when options action returns. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. go home. relax this weekend, hug your children and get ready because next week is nearly as busy and trards are expegting sharp moves. >> that's right. the tech earnings rush may be over, but we're still gearing up for big names to report. linked in will look to continue this earnings season tech

success. media will be watching closely with time warner and 21st century fox while coors and kraft are in the mix. start with tesla. the options market predicts they'll move 7% in either direction. representing a market cap shift of $34 billion alone. other names reporting next week include proctor and gamble and pfizer. both moves of 2% in either direction and there's viacom, the market expecting a 6% move hi see how much of a toll the company's strife has really taken. all four names together represents a market cap shift of almost 50 billion, so while not as big as last week, still, another significant week for earnings. >> all right. thank you. >> carter, you're playing one of these names for a likely breakout, which is it? >> it's pfizer. obviously, one of the bigs

health care name, but a couple of charts. a two panel chart and the s&p 500 health care sector itself and the bottom panel is relative performance. so, we know it's been going up and most things have off of the lows in february, march, but not only an absolute are up, it's relative and when we think that energy industrials and materials haven't been performing well relative of late and health care very good relative performance and that's important. let eat look at one to haver names in health care. i have here the sector, which we just looked at and now, a lag ward on a long-term basis. pfizer, it's lagging on a five-year pace is it's lagging on a ten year basis. it's lagging if you go back to the prior bull market peak of 2000, this spread is appealing, i think we want to be on the

pfizer trade here. so, here's your pfizer chart. the here and now. it's not random where this is coiling. it's coiling at past highs after briefly moving above those highs. it's a tight, tight consolidation. it's a very powerful thing. we're paying for the breakout that's nascent now and just to put this in context, here's your chart. this goes back to the dot com era and what my eye sees is this. here. take it away. put it back. a clear break of the down trend. a nice head and shoulders bottom. you think this throws hire. done want to be long pfizer and overweight, health care. gl thank you. mike. >> do you like pfizer around its earnings? >> i do. we're seeing a little top line growth. not a real screaming grower, but probably looking at 2.5 bucks in

eps over the course of the next year or so. that's got this trading around 14 times earnings. seema pointed out that stock is implying a move of about 2% on earnings, but if you look on earnings to the 20 days that follow, generally speaking, this moves about 5% and if you wanted to make a bet right now, you could buy the september 37 calls for just 60 cents, less than 2% of the current price. let's review that. stock usually moves 5% in the 20 days after earnings and you can buy the september at the money call. 2% of the stock price. to me, that seems like a no brainer. >> i agree. people wrote pfizer off for dead. they say everything's coming off, no room for growth. without getting too much into the weeds in terms of pfizer's products, i'm sure that sounds familiar with one or two. i will say this. pfizer at 13.5, 14 times

earnings, i think it's cheap relative to peers. i think this stock has stealthy rallied. >> an interesting strategy. on the option side of pfizer. still ahead, amgen shares surging this week and hitting a high in today's session. that's making carter worth a pretty happy man. we'll explain why after the break. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim.

td ameritrade.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. time for the upside call. we look back on some of the winning trades, last week, mike and carter played amgen for a breakout. take a listen. gl i think you're going to punch out here. come out through these tops and you're going to make a run for the high. amgen, like it long. >> if i was going to make a play

for the next few month, i think the simple way would be to sell the october 165 puts. you can collect $6.60 for that. the stock hit a 2016 high today. carter. you still like the chart? >> it still should be follow through kind of situation. mean i meaning it's just getting going. moving above tops. big stock, goot results and technically plooks good, so i want to stick with it. >> this is an interesting situation because now, we've seen profits on the short put. you're going to put about three bucks in your pocket and if you want to press it along, that's how much the october 175 185 call spread costs. at this point, you get a free ride to the upside. playing with house money now. >> that's why at 5:30 every friday eastern time, tune into the show. you get trades like that and i agree. amgen is a name we've talked about forever. it's been under pressure the last couple of years because

people don't believe in bio tech, but these guys traded 14 times forward earnings. nine out of the last ten quarter, they've beat or raised eps. they execute and execute well. i think the stock can continue to go higher and for you folks playing at home, as long as the ibp stays above that 285 level, which i think is is critical, it goes higher. >> i'll give a shoutout to josh brown on halftime report. couple of days ago, he said and i can't remember what day it was, that amgen was the best looking chart and stock in any bio techs he'd seen in a long time. a good call a couple of days ago. dpl there are not that many places where you get to buy stocks at valuations below. amgen is one. pfizer is another. >> i like both to the upside. >> up next, your tweets in the final call from the opgs pits. i'm here at the td ameritrade trader offices.

steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. the check they sent isn't enough to replace your totaled new car. the guy says they didn't make the mistake. you made the mistake. i beg your pardon? he says, you should have chosen full-car replacement. excuse me? let me be frank, he says. you picked the wrong insurance plan. no, i picked the wrong insurance company. with liberty mutual new car replacement™, we'll replace the full value of your car plus depreciation. call

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oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.

time to take tweets. first one is for carter. what am i going for 3m puts. >> earnings early in the week. acts poorly. stay short. >> i think you may want the roll them out a little bit further, but i agree to stick with it. must be buying that teflon from due ponte. on to the next one. is it a good time to buy facebook leaps at roughly 20 to 21 times forward earnings? >> one of the things if i was going to press longs on facebook, i think longer date td opgs are the way to do. i think that's a good way to play it. >> i don't know about the leaps. that's like for christmas carols and stuff, but i'll say this. facebook everybody says is expensive, i don't think it is at 26 times forward earnings. they continue to execute. like a 1.75 price target on it.

>> had a very good result this week. the price action wubt that robust, which is it didn't follow through, but either way, this is as steady and orderly chart and a business i would say as you're going to find in the market. >> lower to leap. >> the last one is for guy with melissa gone, thought i'd take the opportunity. >> boxers or briefs. >> i think mel wears boxer, brian. but i don't know if that's something you want to di nlg to the folks at home. >> it came from a viewer and why does there only have to be two options? >> there are more than two? >> do those not count? about the other options. get a little of both. final call. >> final call, you should be wearing under wear regardless of what it is, it's important for everybody there at home. >> mike. >> boxer briefs i think are the way to go during the summer

mont months. >> agreed. >> health casework an interest in pfizer and amgen. >> so you won't need to buy gold bond powder if you treat your body properly. i've really enjoyed being with you guys. it's a tough show to do. looks like our time has ek my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now! hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i just want to make you some money. my job is not just to entertain you but to educate you. so call me at 1-800-743-cnbc. you thought we done with