Dear Momentum Options Subscriber,
Second-quarter earnings season is still in session following the flood of numbers from July. While some of the biggest and largest market cap companies have already reported, there are still some heavy hitters stepping up to the plate this week and during August.
I usually don’t recommend too many earnings trades but there are a few announcements that will be coming into play with our current trades. The first will be concerning Green Dot (GDOT), a small-cap consumer financial services company. Vuzix (VUZI), Energous (WATT), and Viavi Solutions (VIAV) will also announce numbers over the next couple of weeks.
As far as Green Dot, I have covered the technical picture of the stock for nearly a month and shares are within striking distance of their 52-week high of $24.39. Earnings are due out Thursday, after the closing bell.
The company has topped estimates the past four quarters by seven cents, twice, along with a three and four cent beat. Revenues have also come in higher the past two quarters and in three of the past four.
In May, Green Dot raised full-year 2016 earnings to $1.52-$1.57 a share, up from a previous $1.48-$1.53 a share. However, guidance for the recently ended quarter warned of $11 million in “unusual incremental launch expenses.” As a result, the company may fall shy of the expected forecast for earnings of $0.24 a share.
The range Green Dot gave for 2Q earnings was $0.21-0.31 a share. This could mean a headline miss of 3 pennies or a 7 cent beat. The original thesis for the trade was on a technical basis but due to the trading range, it has become an earnings trade. Due to the headlines, this is what makes trading earnings very difficult.
In a perfect environment, Green Dot tops estimates on both the top and bottom line while raising its 3Q forecast and full-year guidance, again. In an imperfect world, this trade is now open to headline risk. I will be keeping the trade open into earnings because I think they will top estimates. However, I wanted to warn more conservative traders about this week’s risk.
As far as earnings for our other trades, I will be covering their forecasts later in the week and into next.
Turning our focus to the market, it’s the same old story. The blue-chips are down and Tech is up. The Dow is down 41 points to 18,390 while the S&P 500 is lower by 3 points to 2,170. The Nasdaq is gaining 16 points to 5,178 and the Russell 2000 is off 2 points to 1,217.
I have updated our trades so let’s go check the action. I could also have a new trade ahead of the bell so stay locked-and-loaded into the close.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 61-19 (76%). 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 1:25 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Vuzix (VUZI, $8.00, down $0.23)
September 10 calls (VUZI160916C00010000, $0.65, flat)
Entry Price: $0.97 (7/27/2016)
Exit Target: $2.00
Stop Target: None
Action: Support is at $8-$7.50 with risk to $7 on a close below the latter. Resistance is at $8.25-$8.50.
Green Dot (GDOT, $23.88, down $0.32)
GDOT August 25 calls (GDOT160819C00025000, $0.61, down $0.04)
Entry Price: $0.80 (7/7/2016)
Exit Target: $1.60
Stop Target: None
Action: Support is at $23.75-$23.50. Resistance is at $24-$24.25.
Energous (WATT, $12.50, up $0.08)
WATT August 12.50 calls (WATT160819C00012500, $0.83, up $0.13)
Entry Price: $1.57 (6/28/2016)
Exit Target: $3.15
Stop Target: $0.50 (Stop Limit)
Action: Resistance is at $12.50-$12.75. Support is at $12.25-$12 followed by $11.75 and the 50-day moving average.
Viavi Solutions (VIAV, $7.13, flat)
VIAV September 7 calls (VIAV160916C00007000, $0.37, flat)
Entry Price: $0.55 (6/23/2016)
Exit Target: $1.10
Stop Target: None
Action: Support is at $7 with $6.90-$6.85 and the 50-day moving average serving as backup. Resistance is at $7.25. Earnings are due out August 11th.
Editor and Chief Options Strategist