The market spent much of Monday on the south side as European debt concerns resurfaced causing the euro to slip versus the dollar. Ireland, Portugal and Spain came back into the picture but the “old news” didn’t help the bears too much. After such a strong breakout last week, the market was due for a breather although Tech didn’t take a break.
The Dow Jones fell 37 points to finish at 11,406. The index traded to a low of 11,362 but was never in any real danger of testing support which lies in the 11,200 area. Our near-term zone is 11,500-11,600 for the index which we would love to see this week.
The S&P 500 traded in a tight 7-point range before giving up 3 points to settle at 1,223. The index briefly slipped below 1,220, its previous 52-week high, but held the 1,200 level. We are looking for a push to 1,250.
The Nasdaq managed a 1 point advance and closed at 2,580. The index traded to a high of 2,583 and we are looking for a run past 2,600 over the near-term.
Turning to earnings, Fossil (FOSL, $63.97, up $1.75) is up 7% in pre-market action after reporting another blowout quarter. Shares are getting a pop after the company easily beat Wall Street’s estimates. For the just ended quarter, the 7 analysts following the company were looking for 73 cents a share, on revenue of $483 million.
In August, the company reported a profit of 80 cents a share while analysts were looking for 34 cents which represented a 135% earnings surprise. Option traders are looking for more of the same this time around and they got it as Fossil reported earnings of $1.00 a share, or 27 cents ahead of estimates, this morning. Wow.
The Fossil November 65 calls (FOSL101120C00065000, $2.65, up $1.25) surged nearly 90% on Monday after opening at $1.60, and should see more strength today. Over 2,500 contracts traded hands in this one strike which was nearly 5x the November put option volume overall.
We were a little shy about pulling the trigger on this trade because the option strikes only traded in increments of 5 which means there was no 67.50 call strike available. The November 70 calls (FOSL101120C00070000, $0.90, up $0.40) also made a nice move, up 80% from Friday’s close, after opening at $0.61 per contract but we didn’t want to go that far out.
We profiled this trade in our video yesterday for our option course, How to Trade Options on Momentum Stocks, and we talked about our dilemma. We didn’t take the trade because we factored in a 10% move in the stock from Friday’s close which only got shares to $69. We were worried about the inflated premium should the stock not break $70 but we didn’t factor in yesterday’s 3% pop in the stock.
Both of these call options made tremendous gains yesterday and should continue higher today. The stock set a 52-week high intraday of $64 on Monday.
As we head to press, futures are pointing towards a slightly higher open as the Dow futures are higher by 21 points to 10,383. The S&P 500 futures are up by 3 to 1,222 while the Nasdaq 100 futures are showing an advance of 8 points to 2,192.
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