Dear Momentum Options Subscriber,
Smith & Wesson Holding (SWHC, $26.99, up $1.59) shares are up 6% after the company announced better-than-expected results following Thursday’s close.
Earning of $0.59 a share were $0.20 cents above expectations for $0.29 a share with revenue of $210 million also coming in higher by nearly $36 million. Wow.
The company also provided current quarter guidance of $0.51-$0.53 a share on sales of $210-$215 million. Wall Street had forecast earnings of $0.47 a share on revenue north of $195 million.
I mentioned I was more bullish than bearish on the stock but that earnings trades are tricky. My research was solid that Smith & Wesson would report another surprise quarter but I just felt the options were a tad expensive.
As a directional play, I profiled the SWHC March 27 calls (SWHC160318C00027000, $1.10, up $0.30) at $0.60 cents to play a breakout to $28 and fresh 52-week peaks. Shares have traded to high of $27.99 today with the calls reaching a peak of $1.40.
Although this wasn’t an official position, I wanted to update the trade since I spent a lot of time researching it and know some of you might have questions on it. With the options expiring in two weeks, I would lock-in half profits and set a Stop Limit at $0.90 cents on the other half, if you got into this trade.
Checking in on the market, the Dow is up 100 points to 17,043 while the S&P 500 is higher by 13 points to 2,007. The Nasdaq is jumping 33 points to 4,740 and the Russell 2000 is gaining 11 points to 1,087.
I have updated our current trades and could have a New Trade ahead of the close. However, if you don’t hear from me by 3 p.m. (EST), have a great and safe weekend and we will chat with everyone on Monday.
Momentum Options Play List
Closed Trades for 2016: Daily 23-4 (85%) All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out each and every day.
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 1:45 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.
CVS Health (CVS, $99.43, up $0.05)
CVS April 105 calls (CVS160415C00105000, $0.45, up $0.00)
Entry Price: $0.45 (3/4/2016)
Exit Target: $0.90
Stop Target: None
Action: The calls opened at $0.45 and below our Limit Price of $0.60 cents following the stock’s dip to $98.66 at the start of trading. The calls traded to a low of 36 cents.
Resistance is at $100-$100.50. Support is at $99-$88.50. I will have the chartwork for you on Monday.
Hertz Global Holdings (HTZ, $10.46, up $0.45)
HTZ April 11 calls (HTZ160415C00011000, $0.65, up $0.13)
Entry Price: $0.55 (2/26/2016)
Exit Target: $1.10
Stop Target: None
Action: A close above $10.25 and the 50-day moving average should lead to a run $12-$13 on continued short covering. The 100-day moving average is just north of $13.50. Support is at $9.50-$9.
You can read my detailed write-up, in the March 3 Mid-Market Update.
Green Dot (GDOT, $21.74, up $0.20)
June 22.50 calls (GDOT160617C00022500, $1.54, up $0.24)
Entry Price: $0.70 (2/24/2016)
Exit Target: $1.75-$2.10 (Limit Order on half at $1.75)
Stop Target: $1.05 (Stop Limit)
Action: Resistance is at $21.50 and the 52-week high of $21.62. A move above $21.75 could lead to a quick run to $22-$24. Support is at $20.50-$20.
Oracle (ORCL, $37.99, up $0.11)
ORCL April 40 calls (ORCL160415C00040000, $0.43, up $0.03)
Entry Price: $0.40 (2/22/2016)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $38.25 and the 200-day moving average. Support is at $37.50-$37.
You can read my detailed write-up, in the Feb. 23 Pre-Market Update. Earnings are due out in a few weeks.
Bank of America (BAC, $13.72, up $0.22)
BAC April 14 calls (BAC160415C00014000, $0.42, up $0.04)
Entry Price: $0.30 (2/9/2016)
Exit Target: $0.60
Stop Target: $0.35 (Stop Limit)
Action: Set a Stop Limit at $0.35 cents to protect profits.
Resistance is at $13.50. Continued closes above this level should lead to $13.75 over the short-term. A close above $13.75 could lead to a run towards $14-$14.25 and the 50-day moving average. Support is at $13.25-$13.
Editor and Chief Options Strategist