hey there, we're live at the nasdaq market site on a very foggy friday the guys are behind me getting ready for the show talk about a face slap shares of facebook are experiencing a rare down day but something suggests now is the time to buy. and one tech stock had a massive run in 2018. the options market is pointing to a big breakout when it reports earnings next week we'll give you the name. plus it's the second worst

performing sector this year. and here's a hint. we'll tell you how to cash in. it's time to risk less and make more the action begins right now. let's get right to it. facebook is facing the music the stock having its worst day since november of 2016, down nearly 5%. this after the social media giant says it is revamping its news feed so users see more posts from friends rather than other content. this stock has been on a meteoric rise despite the controversy, gaining $160 billion in market cap. could this be one of your best chances to buy this stock? the chart master, carter worth, is saddled up at the plasma and ready to go. >> buying weakness has its risks. sometimes it's the best thing you can do i'm in the camp that this is weakness to take advantage of.

let's try to answer the question why. what we know is this has been a very orderly up trend. you can see it here, i've got the channel on it. it's remarkable how precise this asset has responded to the trend over and over and over then we blew out through the top. once you do that in principle, the top of the channel becomes support. there's not that much room between where we are now and the top of the channel so you've got some pretty good support coming in on the long term chart, on the day to day chart over the last year or two. here's the trend line. put it in. and we also are looking at this kind of thing. we're getting into a position where, again, whether you believe this is the beginning of long term trouble or whether it's just a selloff, news-related or not. okay here's the sort of near and now chart. this is six months i think one line you can draw is

what's called the internal trend line, that's along the top, it's very precise you can see that very precise and it responded to it you can also put it in this line, which is the prior high, exactly the prior high and we're back to that level i think it's going to be contained. and again, we've got this trend line my hunch is it's weakness to take advantage of rather than weakness to stay away from i want to step up and buy some facebook >> carter likes it, he thinks it's an opportunity. do you think there's a longer term impact by changing the feed >> i think it definitely is, and it's a smart move on their part. it's smart that they're releasing the information before their earnings come out. it will be a story that progresses possibly into 2019. i like his chart work. what the company is doing makes a whole heck of a lot of sense this stock was up 55% last year.

if you're going to make big changes about how you're going to get new subscribers ornew users to your network after you have 2 billion monthly active users, you have to figure out new things that's what they're trying to figure out, what's the next ten-year plan. >> i think wall street likes this in the long term. but in the more immediate perspective, could it have a hit on revenue and how do you trade it >> it could have an impact on revenues that's one of the reasons the stock got hit today for sure this is one catalyst, earnings coming up at the end of the month are another catalyst at the end of the day, one of the things you ought to think about, does this improve user experience i think this does. and if you think about it in the longer term sense, absolutely i think this is a good thing that this is happening now. wise for them to get in front of it, they're obviously getting a lot of scrutiny. this is an opportunity to use a type of trade that we don't bet off. i'm looking at selling a put spread in facebook, trying to take advantage of the fact that february options are slightly elevated because of the upcoming

earnings i'm looking at selling the february put spread. the stock was trading around 180. you can collect almost half the value spread essentially you could have the stock put to you at the 180 level but you're protected at 175. the idea here being that maybe it's going to bounce, but if it doesn't, if something that comes out on the earnings call is viewed unfavorably, you have protection to the downside >> carter? >> one thing to consider is when you do have a major reset like a breakout or a drop in cap like this, how big a gap is it? it's only 4 or 5%. if it were really trouble, it could easily drop 8 or 12. it seems contained >> i like the way they got the news out before earnings the stock was trading yesterday at very near all time highs. now expectations have come down, when you think about it. now, the onus is on the company to actually put up a beat in raise. the stock is not going to go down too much barring some broad market thing

i like mike's trade, short premium. option premiums are elevated if the stock does nothing, he'll make money if it goes up, you'll make the full difference between the width of the spread and the credit >> what's the one concern you might have, especially as earnings sort of overlap here? >> well, i mean, one could reasonably suggest that this is a stock that is not going to linger right here. it is either going to bounce the way he is suggesting or more news will come out or people will -- sometimes you'll see bad news come out, the stock will trade down, then it will proceed to trade down further for two or three more days as people begin to digest that, people who didn't see it today, for example. we might see that. of course, if that's true you'll be able to take advantage of that on monday if it opens on 175, you'll be selling the 175/170 put spread >> it has to be contained, so far it is. one thing we can also sort of hang onto for now is that this is a type of stock it's treated the same way apple is treated, or amazon.

it's all held up very well there was no spillover you say, of course it wasn't a spillover, this was just a facebook story if there was really a worry, people would go in and do a little trimming. let's stick with technology. earnings season is kicking into full gear. banks will dominate, but we'll also hear from big blue, otherwise known as ibm the dow stock has been on a tear this year as it moved into blockchain technology. dan says this could be the sleeper pick for next week >> this is a massively underperforming last year, one of the worst performing stocks in the dow some of the early year performance, maybe it's associated to a dog to the dow obviously two-thirds of their sales come from outside the u.s. this dollar, you've seen the dixie, the dollar index, it's making multimonth lows here. last quarter, in q3, october 17th, they put up a quarter that surprised people the stock gapped up 9% some of the faster growing

things like cloud and watson did better than people expected. the stock went up, gave it all back, and is now up above those levels you mentioned blockchain blockchain services and some hardware related to it was probably a $700 million business in 2017. some research companies estimate these guys got 30% of it by 2022. some research companies are expecting this to be almost an $8 billion business. ibm seems well positioned here i don't think you're going to get a whole heck of a lot of answers right now about blockchain and what that means for it if you get some of these strategic imperatives doing well for the second quarter in a row, this stock will gap up it could fill a gap from last april. i think you just play this, the call spread, target the risk, define that gap. if you think there's a chance, and you get two consecutive better than expected quarters, this stock is going to go back above 170, possibly 175.

today, when the stock was trading at 164, you could buy the february 165/175 call spread buying one of the feb 165 false for 415, selling one of the calls at $1.15, you could make up to $7 then your risk is the $3 in premium you paid, and you lose all of it. >> that's a lot of numbers >> i will say this it actually makes a lot of sense, the trade you're picking, for a host of reasons. one of them is, as we often point out, you are going to see elevated options premiums. that's why you want to look to spread trades like you're doing here ibm, unlike a lot of other stocks, still has to show us that they can deliver. despite the fact their presence in things like cloud, obviously that's a growth industry, or going to be the key player same thing with blockchain that is a growth industry. will they be the key player? earnings may reveal some of that this is a low risk way to make a bullish bet going into that.

>> it has what one calls bearish to bullish reversal, some people might call that a head and shoulders bottom what we do know is that it has the potential to fill the gap that dan is citing the down gap from april of last year and this stock gaps on its earnings, three out of the past four quarters. there's every possibility that it gaps yet again. >> lastly, the implied move in the options market is only 3%, which is well below how much it moved last quarter for me, the way i think about this, you're risking 2% of the underlying stock price, it breaks up 4% you get the direction right, you're going to make money on this trade you have to have conviction about the fundamentals >> all right got a question out there send us a tweet, or checkous really out our website while there, check out our newsletter what better way to spend a three-day weekend than cuddled up next to a roaring fire reading the calming words of mike khouw what are you waiting for

here's what's coming up yet. it's one of the worst performing sectors this year but something just happened that suggests now might be the time to buy we'll explain. plus calling all options action fans. reach into your pocket, grab your phone, and tweet us your iiotion @optionsactn. ift's nice, we'll answer it on air, when "options action" returns. you traded options.hought i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

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well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. >> reporter: welcome back, i'm dominic chu. call it diversion or rotation, what we've seen in the moves in the stock market have been dramatic over the last few months u.s. government bonds have been

selling off across the yield curve, yes, some maturities more than others. but we've seen some market underperformance in sectors that are considered interest rate proxies. ten-year u.s. government bond yields have been trending higher since early september. over the last three months, the lag in dividend-paying sectors like consumer staples are up telecom services also up around 4% as well real estate has actually lost 5% in that span and the worst performing sector has been the utilities, down around 7%. all four of those sectors are currently the worst performing sectors so far this year as well meanwhile, over the last three months, the more cyclical and economically sensitive sectors like consumer discretionary, energy, and technology have posted double digit gains. if interest rates keep rising,

will traders keep selling off those interest rate stocks >> thanks, dom chu in the newsroom, have a great long weekend. is a safety trade really in danger carter worth is back at the plasma to break it down for us >> it's two stocks, tmvz, reits. two of the oldest indices known to markets, the dow jones utility average. what you have here is a one-year chart. you can see the lines, one is going this way and one is going that way what i want to focus on is this spread between the industrials and the utilities. one-year chart five-year chart. it's all about this divergence 20-year chart. there we go again. this is becoming interesting for a mean reversion setup

let's look at some stats on this here is the here and now chart again. i want to focus on the 40-day spread over the last two months of trading. and the numbers and stats are at follows. going back to 1929, this has happened eight times this is the eighth time. that's an incident rate, you might as well call it zero it's so rare as to be, well, exceptional. what has happened when this has happened in the past, this is industrials versus utilities after, yes, after a 40-day spread of 20% or more. and what happens is the odds of industrials outperforming are low, low, low. and industrials one week, two weeks, three weeks, meaning this is a trade for the weeks ahead, not years or anything like that. industrials underperform they're cyclical of this chart, utilities outperform not only odds of it happening,

but the actual gains relative are what they are. here is the decline. you can see in just quick order you're talking about a plunge of 12.5%. where is this move in the context of the long term chart here is the long term chart. since the absolute low in '09, let's put in our line, and i'll be darned, it's sitting on the line you can make your bet that it's going to bounce. that's mine. you can make the opposite bet. i'm going to make the bet that it's going to bounce >> it's always as if he was surprised himself. >> carter, real quickly, when it broke the one-year trend line from the lows, it went much lower. why can't it do the same thing on the ten-year? >> it can. when you first approach the trend line, that's the point about it, you have a really good rebound potential. you can see that here. let's say it just hesitates and

ultimately breaks and you're in the camp that rates are going to 6% and you don't want to be in utilities, i get all that. but on the first approach to that line, especially given the stats i just showed, i'm going to make the bet that it has rebound potential. everyone is out of this and into the dow. it seems lopsided. >> what's the trade? >> nice thing about utilities, low volatility, but when they're in a trend they can move a lot in a short period. 2% of the current price of xlu, you get until march expiration to make your bullish bet this thing has dropped $6.50 to the downside any bounce could be repaid pretty quickly it could be that rates stopped rising right here, it could be a host of things but it could easily move a dollar or more >> a 12.5% drop over a week or two for something that has a beta that's much lower than market, it means it's a much

bigger drop associated with the type of asset that it is again, if you're in the camp that rates are going much higher and it's all -- you obviously don't want to be in utilities. even if they're going lower, i make the case that they're going lower through a higher price they have rebound potential. >> if you agree with the technicals, mike's trade is set up perfectly for this. it's trading where it was ten days ago i like the trade options you have two months for this thing to play out. i agree, you're probably going to get a low from a higher level. >> there are two sides to this trade, utilities for a bounce or industrials for a decline. with valuations where they are in industrials, what do you have >> you would want to put that on, one, a rate that's so rare as to be exceptional two, the stats on the other times that's happened suggest there is convergence >> and you could sell call spreads in that etf if you chose to to help finance this trade. up next, jpmorgan surging

after its earnings support, we'll explain why that's bad news for one of our traders. at . why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum -- just to help you improve your skills. boom! that's lesson one. education to take your trading to the next level. only with td ameritrade.

we know life can be hectic. that's why, at xfinity, we've been working hard to simplify your experiences with us. now, with instant text and email updates, you'll always be up to date. you can easily add premium channels, so you don't miss your favorite show. and with just a single word, find all the answers you're looking for - because getting what you need should be simple, fast, and easy. download the xfinity my account app or go online today. i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation?

it's just complicated. step-by-step options trading support from td ameritrade welcome back to "options action." time to look back at our open trades last week khouw and carter said jpmorgan was headed for a breakdown. >> yes, it's gone up of late but it's not participating with the general market and overall, it's made no real relative results in about two years. i don't want to be overweight banks here and i don't think jpmorgan is different than the group at large >> i was looking out to march, you could buy the 105/100 put spread for $1.15 >> jpmorgan just reported better than expected earnings this morning and the stock is up 4% carter, what do you say? >> it is up, that's right. i think we've got some time, we want to stay with this the relative is still the problem. if you do it relative to its peer group, the bkx, the stock

is straight down on the chart relative to its peers. that's a problem >> the put spread, the 105/100 put spread, $5 spread is worth 50 cents right now if it did hit, it would pay off nine to one. you wouldn't sell it to initiate a trade here obviously you would stay with it >> a month ago carter and khouw said that small caps would break out. >> we've had this breakout and check back it should be ideal right here, we're right on trend i think you can put your next green arrow in and make the bet that iwm goes higher i want to be longer. >> i was looking at the february you could buy the 152/162 call spread, spend $3.80. >> it was a good call. the i wiiwm is up 4% since then. >> i would probably go out to march at this point. >> rolling out and up meaning

you're going to continue with this strategy? when you think about it, carter was talking about this meltup in industrials. we think about the beneficiaries of obviously tax reform, you know, possibly infrastructure, that sort of thing these domestic companies should benefit. to me, why should you have a commensurate meltup in the iwm women this was an index that was down in the summer >> here too, while it is up absolute, it is massively underperforming the s&p, the large cap peer group >> the move is actually still not that significant obviously we were right, and we had a relatively tight call spread so this is one of the reasons why we could take profits, push it out, and you're going to be playing with house money, as we like to say. up next, final call from the options pits well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out.

td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.

two,that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches?

who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum -- just to help you improve your skills. boom! that's lesson one. education to take your trading to the next level. only with td ameritrade. welcome back to "options action." our first question is from john. when do you use a bullish call

spread versus a bullish put spread, professor mike >> if you can buy a call spread for less than 30% difference between the strikes, by the call spread >> that's also a function of how options are priced, right? if you thought options are priced cheaply, you'll want the call spread. >> zack says, i bought intel feb 16 $43 calls for $1.42 what do you think, dan >> this was a couple of newsy weeks for intel. the options markets are crying about a 4% move. that's what you're risking right here you have some time for this to play out if investors like what they have to say, you'll probably have this stock back above 45 in my opinion over the next month. this trade works okay. i like defining your risk here because it is at a key technical support level. >> time for the final call carter >> final call, i want to be long utilities for a bounce and

facebook as well >> mike khouw. >> utilities, buy those march 51 calls for a buck >> dan nathan? >> you want to define your risk. >> looks like our time has expired. i'm limessa lee. have a meantime, have a great long weekend, everybody enjoy monday "mad money" is up next 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'm just trying to make you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer how high, how high can this market ultimately go after another terrific