Dear Momentum Options Subscriber,
Shares of Nike (NKE, $63.56, up $0.38) are making some noise this week after the company unveiled plans for a self-lacing sneaker. This new adaptive technology could transcend basketball, running, soccer and a wide variety of other sports. Nike plans to release an array of sneakers over the next few years with this type technology, which could truly be a game-changer.
Earnings are due out next Tuesday, and shares could be volatile depending on the results and the company’s outlook. Wall Street is expecting a profit of $0.49 a share on revenue of $8.2 billion.
The high estimate has Nike earning a profit of $0.54 a share on sales north of $8.3 billion. The low estimate has penciled in numbers of $0.46 a share on revenue of $8 billion. This means headline risk of a $0.05 beat or a $0.03 miss.
The company has topped analyst forecasts over the last four quarters by $0.02, $0.07 (twice) and $0.03, respectively.
The chart below shows a possible bullish breakout developing following yesterday’s close above the 100-day moving average. The 200-day moving average has been in a solid uptrend since last November, and the 50-day moving average is starting to level out. The next layers of resistance are at $64-$65, with the December high north of $68. Rising support is at $63-$62.
The NKE near-term options are pricing a possible move of 5% or more in the stock into and after earnings are released.
The NKE April 65 calls (NKE160415C00065000, $1.55, up $0.25) rose 40% yesterday after closing Wednesday’s session at $0.90. Bullish traders could target these call options for further gains. Volume was heavy, as over 11,000 contracts traded hands. If NKE shares clear $68.10 by mid-April, technically, these options will be worth at least $3.10 for a triple-digit return from current levels.
The NKE April 60 puts (NKE160415P00060000, $0.90, down $0.05) fell 35% yesterday on volume a third lighter than the aforementioned call options. If NKE shares fall below $58 by mid-April, technically, these options will be worth at least $2 for a triple-digit return.
These options purchased together would create a strangle option trade for a combined cost of roughly $2.50, with breakeven points at $67.50 and $57.50. If NKE shares clear $70 or fall below $55 by mid-April, technically, the trade would return 100%
I’m more bullish than bearish on Nike, and I will be looking at a possible trade on Monday. For now, it’s time to enjoy the weekend, as I feel safe with our current trades going into next week. However, the Stop Limit on the second half of our position in Intel (INTC) was triggered today, so be sure to check out my update on that below.
The Dow is currently gaining 95 points to 17,576, while the S&P 500 is adding 5 points to 2,046. The Nasdaq is higher by 11 points to 4,786, and the Russell 2000 is jumping 9 points to 1,100.
There are also a couple of non-earnings trades that I have been looking at today, and there is a chance I could add one of them ahead of the close. If you don’t hear from me by 3:30 p.m. EST, however, have a great and safe weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 30-5 (86%). 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 2:30 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.
Intel (INTC, $32.49, up $0.51)
INTC April 29 puts (INTC160415P00029000, $0.17, down $0.07)
Entry Price: $0.38 (3/7/2016)
Exit Target: $0.80 (closed first half at $0.17 on 3/17/2016)
Stop Target: $0.10 (Stop Limit)
Action: The Stop Limit at $0.10 on the second half of the trade triggered today, and we are now out of the entire position.
Nucor (NUE, $46.40, down $0.25)
NUE April 48 calls (NUE160415C00048000, $0.58, down $0.07)
Entry Price: $0.55 (3/17/2016)
Exit Target: $1.10
Stop Target: None
Action: Shares look good for a run at $50 or better, as the 50- and 100-day moving averages are curling higher. The close above $46.50 should lead to a run towards $48-$50. The 52-week high is at $50.70. Rising support is at $46-$45.50.
Sony (SNE, $26.16, up $0.07)
SNE April 26 calls (SNE160415C00026000, $0.95, up $0.04)
Entry Price: $0.72 (3/17/2016)
Exit Target: $1.45
Stop Target: None
Action: Continued closes above $26 and the 200-day moving average would be bullish signal for a possible push towards $28. Short-term support is at $26-$25.75.
Energous (WATT, $9.21, up $0.33)
WATT May 10 calls (WATT160520C00010000, $1.60, up $0.10)
Entry Price: $0.80 (3/15/2016)
Exit Target: $2.40
Stop Target: $1.20 (Stop Limit)
Action: Resistance is at $9-$9.50 on continued momentum. Support is at $8.50-$8.25.
You can read my detailed write-up in the March 17 Mid-Market Update.
American Express (AXP, $61.01, up $0.93)
AXP April 62.50 calls (AXP160415C00062500, $0.69, up $0.23)
Entry Price: $0.60 (3/11/2016)
Exit Target: $1.20
Stop Target: None
Action: Near-term resistance is at $60-$62.50. Support is at $58.50-$58 and the 50-day moving average.
You can read my original write-up and view a chart in the March 14 Pre-Market Update.
Editor and Chief Options Strategist