Harley-Davidson (HOG, $42.56, up $1.21) ended the week on a high note, closing at its high for the day on Friday. It’s a pretty good sign going into the weekend that investor demand is still strong. If the market hadn’t closed, the stock was on its way to $43. A couple of things are going right for Harley right now.

After hitting a bottom of $32.18 on 7/15, the stock is up 30% in a month. The company recently closed a deal for MV Agusta Group, an Italian motorcycle maker for a little over $100 million. Harley had been doing well in Europe anyway, experiencing double-digit growth over the past few years. The acquisition of MV Agusta Group will add a couple of lines of motorcycles to Harley-Davidson’s product mix, including a line of high-performance sport motorcycles.

Another positive sign was that the company had its credit raised by Standard & Poor’s Rating Services which removed Harley’s long-term corporate credit rating from CreditWatch. Harley was placed with a “negative outlook” back in April but now has back its “A” rating. However, the credit rating service also cited a weak motorcycle market and instability in the financial markets which could have an affect on the stock down the road.

The January 40 calls (HOGAH, $5.60, up $0.60) were trading at $4 and the January 50 calls (HOGAJ, $1.45, up $0.25) were trading at $1.15 in mid-June and are approaching 50% gains. The stock is going to run into strong resistance at $45 and if we start the fade, close the position. I’d like to get over $43 and closer to $44 before we bail but if the stock falters at least we will have a decent profit.

Rick Rouse
Rick@OptionsMentoring.com