The bulls are trying to dig themselves out of a hole after starting today’s session in the red on continued worries over a slowdown in China and a decline in France and Germany’s manufacturing numbers. Here at home, jobless claims continued to tick lower but the news had little effect on futures which were showing a bearish open.
Initial Claims fell another 5,000 and came in at 348,000 versus expectations for a print of 354,000. Meanwhile, Continuing Claims were 3.35 million versus a forecast for 3.38 million. Both numbers are 4-year lows.
Nike (NKE, $110.09, down $0.35) will announce earnings after the close today and Wall Street is looking for a profit of $1.17 a share on revenue of $5.8 billion, on average. The 19 analysts who cover the stock have a range of $1.09-$1.26 per share, on revenue of $5.76-$5.9 billion. The company reported a profit of $1.08 in the year ago quarter so there is a chance for an earnings beat or a miss based on estimates.
We have played options on Nike in the past, usually call options, but we are a little hesitant to do so this time around. We think there is a good chance they beat earnings estimates but our feeling is they could be a tad light on revenues. Their relationship with the NFL (National Football League) was a big win but the license agreement doesn’t launch until April so these numbers won’t be reflected in the current quarter.
The April 100 puts (NKE120421P00100000, $0.75, up $0.05) and the April 120 calls (NKE0421C00120000, $0.65, down $0.05) can be used to make a directional bet but we don’t think shares will make a large enough move, either way, to make this a worthy strangle trade. So, we will sit on the sidelines this time around.
As we head to press, the market has bounced off its lows as the bears try to push another layer of support. The Dow is down 64 points to 13,061 while the S&P is off by 9 points to 1,394. The Nasdaq is lower by 11 points to 3,064 and has recovered over half of its earlier losses.
Despite today’s pullback, our current trades are holding up well as none of our Hard Stops have been hit. These stops will protect our triple-digit profits for some of our trades if they are triggered but we are looking for the next levels of support to hold. We have also placed new Hard Stops on some of our other trades that we have already closed half positions in. These stops will also ensure we don’t turn a winning trade into a losing one. With our portfolio light, we will be looking to add new trades soon from our Watch List.
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