Dear Momentum Options Subscriber,
Shares of Tupperware Brands (TUP, $45.54, up $1.04) seem to be oversold, and they are trying to form a bottom at current levels. However, there is risk to $43-$42.50 over the near term on a continued pullback. After clearing $45, the next level of resistance is at $47. Over the longer term, shares could make a run past $50 if the $45 level holds for several sessions during the next few weeks.
The company recently reported earnings of $1.35 a share, which missed Wall Street’s expectations by $0.03. Revenues also came in light at $592 million versus the forecast for a reading of $607 million.
Additionally, management lowered its current-quarter estimate to a range of $0.81-$0.86 a share versus the average expectation of $1.02 a share. Top brass also cut its revenue target by 10%-12%.
It was certainly a “kitchen sink” report, as the company did its best to lower the bar so even a snake could slither over it.
The one bright spot was that the company announced that a $0.68 quarterly dividend will be paid to shareholders. With the current yield approaching 6%, shares could be attractive to dividend-seekers.
With the fundamentals deteriorating, it’s usually best to wait a couple of quarters to see if the company can over-deliver on its low forecast before taking bullish positions. However, this doesn’t mean that a short-term rebound is out of the question.
Bullish traders could target the TUP March 45 calls (TUP160318C00045000, $2.35, up $0.75) or the TUP March 50 calls (TUP160318C00050000, $0.40, up $0.10) if shares recover $45.50-$46. These options would give the trade six weeks to play out.
If shares fail to hold $43-$42.50 on continued weakness, bearish traders could target the TUP March 40 puts (TUP160318P00040000, $0.60, down $0.10). The 10-year chart is showing risk to the mid-$30s if $42-$40 fails to hold.
I wanted to profile this trade in case I take action in the name over the next few days, but, for now, I’m still watching the action from the sidelines. My watch list is exploding with trade ideas, but we still need to be careful given the whipsaw action. In the meantime, I will continue to highlight possible setups to get you prepared for our next batch of trades. Right now, we are just nibbling with our current positions.
The Dow is currently down 53 points to 16,100, while the S&P 500 is lower by 20 points to 1,883. The Nasdaq is declining 78 points to 4,438, and the Russell 2000 is off 11 points to 997.
I could have a New Trade or a Profit Alert ahead of the close, so stay close to your email inboxes or listen for a text alert. New subscribers can sign up to receive SMS text alerts by clicking here.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 14-2 (88%). 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 2:00 p.m. EST.
I hereby disclose that I will be participating in the following trade(s). Every 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 portfolio.
PowerShares QQQ Trust (QQQ, $100.14, down $2.01)
QQQ March 93 puts (QQQ160318P00093000, $1.35, up $0.40)
Entry Price: $1.00 (2/2/2016)
Exit Target: $2.00 (closed first half at $1.40 on 2/3/16)
Stop Target: $0.50
Action: The Exit Target for the second half of the QQQ March 93 puts is at $2.00, but it is no longer a Limit Order.
Short-term support is at $100 following the close below $102.50. Resistance is at $104-$105.
You can read my extended write-up in the Feb. 2 New Trade Alert.
Rambus (RMBS, $12.04, up $0.13)
RMBS March 13 calls (RMBS160318C00013000, $0.30, up $0.05)
Entry Price: $0.35 (2/2/2016)
Exit Target: $0.70
Stop Target: None
Action: Support is at $11.75. Resistance is at $12.25-$12.50.
You can read my extended write-up in the Feb. 2 Pre-Market Update.
Opko Health (OPK, $7.54, down $0.13)
OPK March 7 puts (OPK160318P00007000, $0.42, up $0.02)
Entry Price: $0.35 (1/25/2016)
Exit Target: $0.70
Stop Target: None
Action: Near-term support is at $7.50. A close below this level should lead to the recent January low of $7.12. Multi-year support is at $6. Resistance is at $7.75-$8.
You can read my earlier write-up in the Jan. 26 Pre-Market Update.
Trades on Hold — other 2015 Portfolio Open positions (1): 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.
Garmin (GRMN) February 30 puts — Continue to hold.
Editor and Chief Options Strategist