1:00pm (EST)
The bulls are trying to make a comeback after starting the morning in the red. They were able to bring the market off its session lows and into positive territory but the bears are prowling today ahead of Intel’s (INTC, $22.63, up $0.09) earnings report after the bell.
The stock got an upgrade this morning although its’ having little impact on shares at the moment. Intel will be the first tech bellwether to report earnings so what they say will likely set the tone for Wednesday’s trading. Wall Street is expecting the company to post a profit of $0.38 a share on revenue of $9.8 billion.
As a result, trading is choppy as we head into the second half of today’s session but the Dow is holding 11,000. The index is currently down a point and is at 11,005 while the S&P 500 is off by 3 points to 1,193. The Nasdaq has also slipped 3 points and is trading at 2,455.
Intel will likely report a good quarter but we wanted to highlight Fastenal’s (FAST, $53.33, up $1.43) fantastic quarter today. The company reported a profit of $56 million, or $0.38 a share versus $49 million, or $0.33 a share, in the year-ago period. Revenue was up 6% to $521 million.
Our subscribers made some FAST profits by closing their call options for over a 135% return in just under 24 hours. How sweet is that? Shares hit a high of $54.95 and we alerted our subscribers to sell half into strength and to set a tight stop on the rest this morning before the opening bell. Although the hard stop was hit, it was an easy trade to figure out as everyone else was focused on playing Alcoa (AA, $14.23, down $0.34).
Fastenal was not on Wall Street’s radar and we expect an analyst or two will come out and upgrade the stock following today’s beat on earnings. Speaking of which…
We often wonder about some of the analysts who work on Wall Street these days. We aren’t sure if they are seasoned vets or kids fresh out of college who only studied the market through books. Don’t get us wrong; some analysts are really good with their opinions but most “upgrades” or “downgrades” are given on a whim and without much thought.
Take for instance, Best Buy (BBY, $44.61, down $0.48), a stock we have followed for years and whose price pattern we have often nailed. On March 18, we profiled a call option trade in our Members Area that returned over 175% and we had this to say when shares were at $40 (stock and option quotes from that day):
Best Buy (BBY, $40.11, up $0.53)
April 41 calls (BYY100417C00041000, $1.10, up $0.25)
Action: We have been watching this one for over a week and we have been waiting for another close above $40 to confirm support. We think shares can hold $39-$40 with a possible run towards its 52-week high of $45.55.
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Well, subscribers caught a wave after the company announced a blowout quarter a week later and they locked in a 100% profit by selling half their position on the April 41 calls into strength at $3.50. The plan was to hold the other half and ride them higher as the rally continued but we were stopped out the next day after an analyst downgraded the stock. Shares were at $43.
Fast forward to today and Best Buy traded above $45 yesterday and those April 41 calls are at $4.40. The call options are currently at $3.50 but sometimes these upgrades or downgrades can cost you profits although OUR research was better than Wall Street’s.
That downgrade hurt the momentum of the trade but our subscribers’ profits were still fat. And wouldn’t you know, an analyst “upgraded” the stock yesterday on rumors the company might buy RadioShack (RSH, $23.45, up $0.18). Of course, we already told you that story but it is making the rounds again.
If a buyout comes for the Shack we expect it to be north of $30.
We are going to be listening to Intel’s conference call for clues on how the rest of the week might shake out and we will be back in the morning with an update. Current subscribers, check the Members Area for important updates.
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