Dear Momentum Options Subscriber,

Although third-quarter earnings season has mostly come and gone, there are a number of other high-profile companies reporting earnings this week that are worth watching. Below is a list of the ones I will be looking at, and I will likely have a trade on two on some of these announcements. I still need to do the research and chart work, but here are the stocks I’m watching.

Bob Evans Farms (BOBE, $55.13, up $0.88) will report their second-quarter numbers after the close today. Shares are pushing 52-week peaks, and traders are bidding up the BOBE December 60 calls (BOBE141220C00060000, $0.65, up $0.10) ahead of the announcement. At current levels, shares need to move 10% to get these calls “in the money,” but it seems like a risky bet.

On Wednesday, Abercrombie & Fitch (ANF, $28.31, up $0.16) will confess their numbers ahead of the open. I have been bearish on the stock for years, but trading its earnings announcements can be tricky due to the short interest. Shares are near 52-week lows, but any good news could lead to a rally.

Aeropostale (ARO), American Software (AMSWA), Pacific Sunwear of California (PSUN), PVH Corp (PVH), Synopsys (SNPS), Tilly’s (TLYS) and Verint Systems (VRNT) will report earnings after Wednesday’s close. There may be an option candidate out of this batch, but not with the retailers.

On Thursday, Barnes & Noble (BKS), Christopher & Banks (CBK), Dollar General (DG), Express (EXPR), Kroger (KR), Sears Holdings (SHLD), Toro (TTC) and United Natural Foods (UNFI) will release their results ahead of the open.

After Thursday’s close, Ambarella (AMBA), American Eagle Outfitters (AEO), Casella Waste Systems (CWST), Cooper Companies (COO), Delta Apparel (DLA), Finisar (FSNR), Five Below (FIVE), Smith & Wesson (SWHC), Sportsman’s Warehouse Holdings (SPWH) and Ulta Beauty (ULTA) will update Wall Street with their numbers.

Earnings trades are tricky because results and future guidance play a major role in how investors react to the news. An earnings beat doesn’t guarantee a higher stock price, as weak guidance might cause a pullback.

I will be doing some digging to see if there is a possible trade out of this batch with good risk/reward potential, so stay tuned.

As far as the market, the bulls are battling back from Monday’s pullback but are struggling with short-term resistance. The Dow is higher by 50 points to 17,827, while the S&P 500 is gaining 8 points to 2,061. The Nasdaq is advancing 16 points to 4,744, and the Russell 2000 is popping a 12-pack to 1,166.

I have updated our current trades, so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2014: 95-56 (63%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.

All prices given in this update are current as of 12:45 p.m. EST.

Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.


Diamond Foods (DMND, $29.60, down $0.17)

DMND December 32 calls (DMND141220C00032000, $0.70, flat)

Entry Price: $0.87 (11/18/2014)

Exit Target: $1.75

Return: -20%

Stop Target: None

Action: Near-term resistance is at $30.50. Support is at $29. Earnings are due out on Monday, Dec. 8, after the close.

You can read my detailed write-up on DMND in the Nov. 19 Mid-Market Update.


IMAX (IMAX, $30.85, down $0.15)

IMAX December 32 calls (IMAX1220C00032000, $0.50, flat)

Entry Price: $0.35 (11/12/2014)

Exit Target: $0.70 (Limit Order on Half)

Return: 43%

Stop Target: None

Action: Support is at $30. Resistance is at $31.50-$32.


International Business Machines (IBM, $161.83, up $0.29)

IBM January 170 calls (IBM150117C00170000, $0.85, flat)

Entry Price: $1.75 (11/10/2014)

Exit Target: $3.50

Return: -51%

Stop Target: $0.50

Action: Resistance is at $163.50. Support is at $160.

You can read more about why I like this trade and its risk/reward setup in the Nov. 11 Pre-Market Update.


Flextronics (FLEX, $11.15, up $0.04)

FLEX January 11 calls (FLEX150117C00011000, $0.45, flat)

Entry Price: $0.68 (9/5/2014)

Exit Target: $1.25

Return: -33%

Stop Target: None

Action: Resistance is at $11.25-$11.50, and a close above the latter should get the 52-week high of $11.83 in play. Support is at $10.75, with backup at $10.50 and the 100-day moving average.


Trades on Hold — other 2014 Portfolio Open positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.

Rubicon December 8 calls (From August 2014) — Continue to hold.

Fortinet December 29 calls (from September 2014) — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options