This weeks Earnings Snapshots sent Sunday night to subscribers:
Earnings Snapshots for the Week
AutoDesk (ADSK) will report earnings Tuesday after the close, and shares have traded down 3 of the last 4 reports, including an 11.7% fall last report. Shares are forming a bullish flag under its 200 day SMA at $36.85. The $7.83B software Co. trades 31.4X trailing earnings, 2.2 PEG, 3.76X sales and 16.3X cash flow, fairly rich for less than 15% EPS growth going forward. UBS reiterated a Buy with a reduced $42 target on 11-2, and BofA cut to Neutral from Buy on 11-9. November IV is bid higher to 65.5% with December at 49.4%, options pricing in around a 7% move on earnings. On 10-27 more than 5,000 April $40 calls were sold to open, likely part of a buy write position, and on 10-7 the November $32/$27 bullish risk reversal traded 5,000X at $0.23, the calls still in Open Interest. ON 10-24 a block of 5,000 April $36 calls was bought at $2.72 to open.
Trade to Consider: Sell the ADSK November 35/32 Strangle at a $1.40 Credit
Result: Shares Closed $33.50 Friday, Keeping the Full $1.40 Credit
Covidien (COV) is set to report earnings Tuesday before the open and shares have gained each of the last 4 reports on results. Covidien shares are setup with an ascending triangle, $48.50 the breakout point and $45 the breakdown point, but longer term in a channel down pattern with $40 the next lower low. Covidien is a $23.5B leader in medical instruments and trades 11.1X earnings, 1.2 PEG, 2.1X sales and 15.66X cash flow, also yielding 1.89%. Credit Agricole started shares a Buy back in early October, but not much Analyst action recently. Becton Dickinson (BDX) shares were recently hit hard on earnings, a close peer. November IV at 41.7% compares to December at 34.44%. Back on 10-26 there was unusual put action in April $45 puts bought 2,900X at $3.90/$4.
Trade to Consider: Long the COV November/December $45 Calendar Put Spread at $0.75
Result: COV closed Friday $45.61, December Puts Worth $1.55, +100%
NetApp (NTAP) will report earnings Wednesday after the close, and it has been a volatile mover on earnings, last report falling as much as 20% and closing 14% lower. Before last report 4 of the prior 5 were strong moves higher on results, but numbers have been disappointing lately. NTAP shares have been trending higher and could make a run to $46 to test a prior breakdown and just below the 200 day SMA. The $15.55B storage Co. trades 15.2X earnings, 2.86X sales and 13.75X cash flow, a fairly cheap Tech large cap growth play. Piper lowered its target to $53 on 11-7, but sees 3 new product cycles driving a new wave of growth, and easy y/y comps. ISI Group started Buy with $48 target on 10-14. NetApp November IV is extremely high at 81.7% compared to December at 49.1%, and options pricing in a 9% move on earnings. NetApp had been the focus of a lot of bullish risk reversals in recent months with Institutional size, but many have been closed now, but will review the recent trading. On 8-15 the January 46 and 48 calls were bought in size, and still open, on 8-16 7,500 March 35 puts were sold to open, on 8-23 7,000 March 45/30 bull risk reversals traded, a contract that appears to have over 20,000 open now that accumulated in the days following. More recently on 10-27 6,900 November $35 puts were sold and 5,000 January 2013 $40 puts were sold to open, while 5,400 November $42 calls were bought and 2,500 March 2012 $45 calls at $2.46 offer. On 11-7 5,000 November $39 puts were sold to open, and last week there was a slight bearish bias in November options, but longer term NTAP seen as a winner, so a buy on weakness play.
Trade to Consider: Long the NTAP November/December $45/$39 Double Calendar Spread at $1.15 or Better
Result: NTAP moved much more than anticipated, depending on how the trade was manged it is likely a losing trading here.
Aruba Networks (ARUN) will report results Thursday after the close, and is a stock that has traded higher in 7 of the last 8 reports, May being a 17% fall, while last quarter shares jumped more than 22% at a point. Shares have trended higher since early August and held trend support, showing relative strength during weak markets, but recently relative weakness in strong markets. Shares look likely to leave the $23/$25 range this week. Aruba is a $2.5B networking play with its hands in cloud computing, a major growth play, and potential acquisition target. Shares trade at a premium, 30.85X earnings, 1.76 PEG, 6.3X sales and 52X cash flow, also a big 20.65% short float that fuels the large swings on earnings. Brigantine cut shares to Hold from Buy on 11-10, while JMP started Outperform with a $30 target on 11-2. Deutsche Bank started Hold on 11-1 with a $27 target, noted as the leading provider of wireless equipment for campus environments. November IV at 124% and December at 79.7%, options pricing in an 11.5% move on earnings. There is notable open interest in November 26 calls, over 9,000, and 7,600+ in November 24 calls.
Trade to Consider: Long the ARUN November 24/27 Call Spread at $0.95 and Sell the November $20 Puts at $0.55 for $0.40 Net Debit
Result: This trade could have put put on for a net credit as ARUN as down 8% the day into earnings, and did hold $20, also opened near $24 so the calls could have been sold off as well for a nice profit.
Intuit (INTU) reports earnings 11/17 after the close, and shares have gained 5 of the last 7 reports, a strong 12% move higher last report, closing 8.3% higher, but shares have traded lower the past 2 November reports, a potential seasonal factor. Intuit shares are near all time highs with major resistance overhead at $55, major support down at $50. The $16.25B tax software Co. trades 26.75X trailing earnings, 16.4X forward earnings, PEG 2, 4.2X sales and 20.7X cash flow. UBs reiterated a Buy and raised its target to $60 on 11-8. Intuit recently announced a collaboration with AT&T to offer small business easy credit card processing on mobile devices, so it is entering a new growth market. Deutsche Bank raised its target to $68 on 10-31, a very bullish call. November IV at 49.1% compares to December at 35.3% and options pricing in around a 5% move. There is not a lot of notable Open Interest in November options, the November $55 calls traded 589 Friday against OI 2,294 with mostly offer side buys, and another 1,100 were bought on 11-9, also 100 Nov. 52.5/55 call spreads.
Trade to Consider: Sell the INTU November $55/$52.50 Strangle at $3 Credit
Result: INTU Closed $52.04, Buying Back the Puts at $0.45, a Solid $2.55 Kept ont he $3 Credit
Marvell Tech (MRVL) will report earnings 11/17 after the close and has traded higher 8 of the last 9 reports, including max moves of more than 12% the last 3 reports, generally a large mover. MRVL is forming a great looking inverse head and shoulders pattern with $15.70 the key breakout point, and $13 shoulder support. A move above $15.20 would break shares above its 200 day SMA for the first time since February 2011. The $9B chip Co. trades 10.6X earnings, 0.7 PEG, 1.8X book, and 9.6X cash flow. RBC started Outperform with a $21 target on 10-12, and Cowen started Outperform 10-14. November IV at 66.14% compares to December at 45%, options pricing in a 7% move, cheap to historical moves. There has been notable accumulation in November, December and January calls in recent months, a ton of open interest.
Trade to Consider: Long the MRVL January 2012 $15 Calls at $1.05 and Sell the January 2012 $12.50 Puts at $0.35, Net $0.70 Debit
Result: MRVL reported strong and looks poised to move higher, and no reason to exit this one.
Friday, November 18, 2011
Wednesday, November 16, 2011
Most Annoying Twitter Habits
Recently I am finding Twitter to be more distracting than useful, and here are some of the things I see that are annoying throughout the day and jumble up the stream:
1) Asking for Re-Tweets of a Blog Post - If it is good, people will re-tweet, stop looking desperate
2) Re-Tweeting a Compliment from a Follower - How About Just Responding to that Person with a Thank You, No Need to Show Off to the World How Awesome You Are
3) Typing Out Sound Effects (Bang, Boom, Pow, Bam, etc.) on a Stock that Moves a Few Cents...Let's Keep the Celebrations for 10%+ Moves, Anything Less is Not Worth Cheering
4) Adding $ Symbol to a Ticker and Providing a Link to a Member-Only Area of a Website - Happens all the time although I though this was supposed to be banned
5) Responding with vague questions - As someone that may tweet 5 times in 2 hours, I need to know what tweet you are referencing in your question, no time to by a twitter sleuth
6) Twitter Muscles - Do Not Act All Tough Behind a Keyboard - Refrain from Saying Anything You Would Not Say Face to Face
1) Asking for Re-Tweets of a Blog Post - If it is good, people will re-tweet, stop looking desperate
2) Re-Tweeting a Compliment from a Follower - How About Just Responding to that Person with a Thank You, No Need to Show Off to the World How Awesome You Are
3) Typing Out Sound Effects (Bang, Boom, Pow, Bam, etc.) on a Stock that Moves a Few Cents...Let's Keep the Celebrations for 10%+ Moves, Anything Less is Not Worth Cheering
4) Adding $ Symbol to a Ticker and Providing a Link to a Member-Only Area of a Website - Happens all the time although I though this was supposed to be banned
5) Responding with vague questions - As someone that may tweet 5 times in 2 hours, I need to know what tweet you are referencing in your question, no time to by a twitter sleuth
6) Twitter Muscles - Do Not Act All Tough Behind a Keyboard - Refrain from Saying Anything You Would Not Say Face to Face
Friday, November 11, 2011
Earnings Snapshot Trades Review
To start, you often hear that "Trading Earnings is a Gamble" or "Do Not Trade During Earnings" but option traders know that this is the best time to trade, and the most opportunity for big gains. I use fundamental, technical, and options flow analysis, sometimes for directional trades, and other times you can be a net buyer/seller of volatility, so always a lot of flexibility when trading options.
Each week I send out a quick snapshot of the primary reports, the stocks that move, and a trade to consider into earnings.
Here is a review of this past week's with the result:
7 Earnings Snapshots for the Week of November 7th
Priceline.com (PCLN) will report earnings Monday after the close, and shares have jumped more than 8% on earnings 4 of the last 5 reports, including a 22% climb in Aug. 2010, while May 2011 was the only negative reaction, just a 2.8% loss, so a positive history of earnings reactions. Priceline shares have a lot of support at the $450 level and resistance at $552, currently consolidating in the $480 to $525 range. Both MACD and RSI are in downtrends since the July highs. The $25.55B online travel Co. trades 17.6X forward earnings, 1.4 PEG and 26.77X cash flow, considered one of the top growth plays, but a weak EU economy could hamper results. Wedbush started shares Outperform in September with a $675 target. Piper expects a slight beat and In-Line guidance, Overweight with a $640 target. Jefferies initiated Buy with a $580 target on 10-12. International Bookings growth has been the key for PCLN and the reason it deserves to trade at a premium. Priceline does trade weekly options and recently has seen a strong bullish bias with call premium purchased surpassing $1M a few days last week. The November weekly 525/550 1X2 call spread traded at $1 on Friday 315X630 contracts.
Trade to Consider: Sell the PCLN November $460 Puts at $10.50 and Buy the November $530/$550 Call Spread at $7.30 for $3.20 Net Credit (Risk = Willing to be Long Stock at $456.80 Cost Basis)
Result: This $3.20 Net Credit Trade Ends the Week at around $8.20, a huge winner
Rackspace Hosting (RAX) will report earnings Monday night after the close, and shares closed 2.23% lower last report, although were 14.75% higher intraday, and also closed higher the prior 4 reports. The chart is healthy, a recent break out at $38 that measured to $45 and shares closing last week at multi-month highs, under accumulation. The $5.57B cloud computing Co. is often considered a takeover target and trades at a hefty premium, 54X earnings, 3 PEG and 55X cash flow. BofA reiterated Buy and a $45 target ahead of the report, seeing Q3 acceleration and a modest beat. Option traders were recently busy on 11-3 with 5,000+ November $41 puts sold to open.
Trade to Consider: Sell the RAX November $42 Straddle at $4 (8 Straight Reports with Sub-10% Moves on the Close)
Result: RAX closes this week at $42.39 and this straddle could be bought back at $2.15, a strong gainer, or can allow more decay into next week
Fossil (FOSL) will report earnings Tuesday before the open, and shares have moved big on earnings recently, a 25.9% max move lower last report, closing 12.5% lower, and the prior quarter a 12.7% gain on the report. The $6B apparel Co. trades 17.55X earnings, 1.25 PEG, 2.65X sales, and 37.85X cash flow. Brean Murray cut shares to Hold on 10-31, and Benchmark cut to Hold on 10-28. On the chart shares failed to sustain a breakout past $105, and now sit above its 50 day EMA at $95, near a trend break that would send shares to $85 or lower. On 11-3 a trader sold 4,000 November $85 puts to open at $2, a willing long.
Trade to Consider: Long the FOSL November $95/$85 1X2 Put Spread at $1 Debit
Result: FOSL trade can be closed around $3 for a 200% gain, or hold another week and realize even more. Also, could close without buying back short puts as it is unlikely to see $85 next week and then the $4 close price is a 300% gain.
Sina Corp (SINA) will report earnings Tuesday after the close, and shares gained 3.55% last report, but fell more than 5.5% the prior 2 reports, averaging just above a 5% move on earnings the last 8 reports. The $5.5B Chinese Internet stock has spent the last quarter with concerns on increased Chinese regulations, and trades 50.7X earnings and 4X book, expensive, but a major growth name with Weibo, the Chinese Social media play. There is 10.9% of the float short. Maxim initiated shares a Sell with a $72 target on 10-17, while others see shares worth $140 or more if it spins off Weibo. On the chart shares have been making lower highs and lower lows, overall a bearish pattern and currently stuck below its 200 day EMA and declining 50 day EMA. The December 100 calls have been under accumulation in recent weeks with over 15,000 in Open Interest. Sina IV looks fairly rich considering the moves in recent reports, currently pricing in a 12.5% move on earnings with the weekly options.
Trade to Consider: Sell the SINA November $95/$72.50 Strangle at $4.90 Credit
Result: SINA strangle can be bought back at $1.20, but best to let expire and see the max profit as that range looks fair through next week
Weight Watchers (WTW) will report earnings Tuesday after the close, and shares have been volatile, tanking 22.8% last report at a point, and 10.3% the prior, also a 47.4% gain 3 quarters ago. The $5.55B Co. trades 16.75X earnings, 1.58 PEG, and 32.3X sales, also a 20.5% short float, 6.5 days to cover. Shares based along $55 for weeks, and recently have taken off back near highs. Auriga started shares Buy on 9-28 with a $71 target, a nice call, shares already trading well above most Street targets. On Friday traders purchased more than 3,600 November $70 puts around $2.60/$2.70 to open into earnings, and yet to see much action on the call side, options pricing in 12% movement for shares.
Trade to Consider: Long the WTW November 80/85 Call Spread and 72.5/67.5 Put Spread for $2.80
Result: WTW trade can be closed around $3.35 now, but was potential to close closer to $4 after earnings, a solid gain
Ralph Lauren (RL) will report earnings Wednesday 11-9 before the open, and shares have averaged max earnings moves intraday of more than 9%, and 5 of the last 6 positive moves. Shares of the $14.55B retailer trade 20X earnings, 2.4X sales and 34X cash flow, rich on valuation in my view. Macquarie started shares Neutral with a $148 target on 10-18. Shares of RL put in a shooting star top, closing deeply red after a break to all time highs last week, but riding its 20 day EMA higher, shares likely to stay in a $140 to $170 range near term. On 10-24 the November $140 puts were sold to open for 6,000+, some of which closed now, while November 165/170 call 1X2 spread bought 1,290X2,580 for a net credit.
Trade to Consider: Long the RL November 155/145/135 Put Butterfly at $1.65 Debit
Result: Shares moved lower to $147 and the spread was a strong gainer, and closed the week at $2, overall a nice winner
Nordstrom (JWN) will report earnings Thursday after the close, and shares have traded lower 4 of its last 6 reports, and last week fell on disappointing same store sales, but quickly rebounded off the 50 day EMA. Shares outperformed during the weak market tape in October, but have put in a rounded top pattern and the recent top showed bearish divergence on MACD and RSI. Shares trade 14X earnings, 1.05X sales and 19.23X cash flow. Macquarie started shares Outperform with a $60 target in October. Nordstrom open interest is high in November 50, 52.50 and 55 calls, including one large holder of 4,000 November 52.50 calls that rolled to that strike from October before expiration.
Trade to Consider: Long the JWN November 52.50 Calls at $0.85 or Better
Result: JWN disappointed, so the calls only worth about $0.10 here, still some time, or could roll out to December, a loser so far
Overall 6 winners and 1 loser, not a bad ratio!
Each week I send out a quick snapshot of the primary reports, the stocks that move, and a trade to consider into earnings.
Here is a review of this past week's with the result:
7 Earnings Snapshots for the Week of November 7th
Priceline.com (PCLN) will report earnings Monday after the close, and shares have jumped more than 8% on earnings 4 of the last 5 reports, including a 22% climb in Aug. 2010, while May 2011 was the only negative reaction, just a 2.8% loss, so a positive history of earnings reactions. Priceline shares have a lot of support at the $450 level and resistance at $552, currently consolidating in the $480 to $525 range. Both MACD and RSI are in downtrends since the July highs. The $25.55B online travel Co. trades 17.6X forward earnings, 1.4 PEG and 26.77X cash flow, considered one of the top growth plays, but a weak EU economy could hamper results. Wedbush started shares Outperform in September with a $675 target. Piper expects a slight beat and In-Line guidance, Overweight with a $640 target. Jefferies initiated Buy with a $580 target on 10-12. International Bookings growth has been the key for PCLN and the reason it deserves to trade at a premium. Priceline does trade weekly options and recently has seen a strong bullish bias with call premium purchased surpassing $1M a few days last week. The November weekly 525/550 1X2 call spread traded at $1 on Friday 315X630 contracts.
Trade to Consider: Sell the PCLN November $460 Puts at $10.50 and Buy the November $530/$550 Call Spread at $7.30 for $3.20 Net Credit (Risk = Willing to be Long Stock at $456.80 Cost Basis)
Result: This $3.20 Net Credit Trade Ends the Week at around $8.20, a huge winner
Rackspace Hosting (RAX) will report earnings Monday night after the close, and shares closed 2.23% lower last report, although were 14.75% higher intraday, and also closed higher the prior 4 reports. The chart is healthy, a recent break out at $38 that measured to $45 and shares closing last week at multi-month highs, under accumulation. The $5.57B cloud computing Co. is often considered a takeover target and trades at a hefty premium, 54X earnings, 3 PEG and 55X cash flow. BofA reiterated Buy and a $45 target ahead of the report, seeing Q3 acceleration and a modest beat. Option traders were recently busy on 11-3 with 5,000+ November $41 puts sold to open.
Trade to Consider: Sell the RAX November $42 Straddle at $4 (8 Straight Reports with Sub-10% Moves on the Close)
Result: RAX closes this week at $42.39 and this straddle could be bought back at $2.15, a strong gainer, or can allow more decay into next week
Fossil (FOSL) will report earnings Tuesday before the open, and shares have moved big on earnings recently, a 25.9% max move lower last report, closing 12.5% lower, and the prior quarter a 12.7% gain on the report. The $6B apparel Co. trades 17.55X earnings, 1.25 PEG, 2.65X sales, and 37.85X cash flow. Brean Murray cut shares to Hold on 10-31, and Benchmark cut to Hold on 10-28. On the chart shares failed to sustain a breakout past $105, and now sit above its 50 day EMA at $95, near a trend break that would send shares to $85 or lower. On 11-3 a trader sold 4,000 November $85 puts to open at $2, a willing long.
Trade to Consider: Long the FOSL November $95/$85 1X2 Put Spread at $1 Debit
Result: FOSL trade can be closed around $3 for a 200% gain, or hold another week and realize even more. Also, could close without buying back short puts as it is unlikely to see $85 next week and then the $4 close price is a 300% gain.
Sina Corp (SINA) will report earnings Tuesday after the close, and shares gained 3.55% last report, but fell more than 5.5% the prior 2 reports, averaging just above a 5% move on earnings the last 8 reports. The $5.5B Chinese Internet stock has spent the last quarter with concerns on increased Chinese regulations, and trades 50.7X earnings and 4X book, expensive, but a major growth name with Weibo, the Chinese Social media play. There is 10.9% of the float short. Maxim initiated shares a Sell with a $72 target on 10-17, while others see shares worth $140 or more if it spins off Weibo. On the chart shares have been making lower highs and lower lows, overall a bearish pattern and currently stuck below its 200 day EMA and declining 50 day EMA. The December 100 calls have been under accumulation in recent weeks with over 15,000 in Open Interest. Sina IV looks fairly rich considering the moves in recent reports, currently pricing in a 12.5% move on earnings with the weekly options.
Trade to Consider: Sell the SINA November $95/$72.50 Strangle at $4.90 Credit
Result: SINA strangle can be bought back at $1.20, but best to let expire and see the max profit as that range looks fair through next week
Weight Watchers (WTW) will report earnings Tuesday after the close, and shares have been volatile, tanking 22.8% last report at a point, and 10.3% the prior, also a 47.4% gain 3 quarters ago. The $5.55B Co. trades 16.75X earnings, 1.58 PEG, and 32.3X sales, also a 20.5% short float, 6.5 days to cover. Shares based along $55 for weeks, and recently have taken off back near highs. Auriga started shares Buy on 9-28 with a $71 target, a nice call, shares already trading well above most Street targets. On Friday traders purchased more than 3,600 November $70 puts around $2.60/$2.70 to open into earnings, and yet to see much action on the call side, options pricing in 12% movement for shares.
Trade to Consider: Long the WTW November 80/85 Call Spread and 72.5/67.5 Put Spread for $2.80
Result: WTW trade can be closed around $3.35 now, but was potential to close closer to $4 after earnings, a solid gain
Ralph Lauren (RL) will report earnings Wednesday 11-9 before the open, and shares have averaged max earnings moves intraday of more than 9%, and 5 of the last 6 positive moves. Shares of the $14.55B retailer trade 20X earnings, 2.4X sales and 34X cash flow, rich on valuation in my view. Macquarie started shares Neutral with a $148 target on 10-18. Shares of RL put in a shooting star top, closing deeply red after a break to all time highs last week, but riding its 20 day EMA higher, shares likely to stay in a $140 to $170 range near term. On 10-24 the November $140 puts were sold to open for 6,000+, some of which closed now, while November 165/170 call 1X2 spread bought 1,290X2,580 for a net credit.
Trade to Consider: Long the RL November 155/145/135 Put Butterfly at $1.65 Debit
Result: Shares moved lower to $147 and the spread was a strong gainer, and closed the week at $2, overall a nice winner
Nordstrom (JWN) will report earnings Thursday after the close, and shares have traded lower 4 of its last 6 reports, and last week fell on disappointing same store sales, but quickly rebounded off the 50 day EMA. Shares outperformed during the weak market tape in October, but have put in a rounded top pattern and the recent top showed bearish divergence on MACD and RSI. Shares trade 14X earnings, 1.05X sales and 19.23X cash flow. Macquarie started shares Outperform with a $60 target in October. Nordstrom open interest is high in November 50, 52.50 and 55 calls, including one large holder of 4,000 November 52.50 calls that rolled to that strike from October before expiration.
Trade to Consider: Long the JWN November 52.50 Calls at $0.85 or Better
Result: JWN disappointed, so the calls only worth about $0.10 here, still some time, or could roll out to December, a loser so far
Overall 6 winners and 1 loser, not a bad ratio!
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