Dear Momentum Options Subscriber,

One company that is scheduled to report earnings this week is of special interest to us, as we are long call options on Viavi Solutions (VIAV, $7.34, up $0.09). VIAV’s numbers are due out after Thursday’s closing bell, and analysts are looking for a profit of $0.09 a share on revenue north of $220 million.

The company topped forecasts by $0.01, $0.04, $0.02 and $0.05, respectively, during the past four quarters, and shares are hitting fresh 52-week peaks today heading into the announcement. This is usually a bullish sign, but I often say that earnings trades are tricky. Hopefully, Viavi Solutions will report a beat-and-raise quarter and a rosy outlook for the rest of 2016.

The two-year chart below shows that a possible run to $8+ and multi-year highs could be in play on a blowout quarter. An earnings miss or lowered guidance could send shares south of $7. In other words, there is a chance that VIAV could make a 5%-10% post-earnings move.

There has been very little analyst coverage of the stock, with no upgrades or downgrades in nearly a year. The last recommendation I found during an extensive search was a “Buy” rating from UBS back on Aug. 13, 2015. Aside from that, there is another “Strong Buy” recommendation, along with nine “Hold” ratings. A strong quarter could get the zombies with Hold recommendations off of the fence and to upgrade the stock to a Buy.

The Dow is currently down 16 points to 18,512, while the S&P 500 is lower by 2 points to 2,179.  The Nasdaq is gaining 8 points to 5,221, and the Russell 2000 is up a point to 1,231.

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

Momentum Options Play List

Closed Momentum Options Trades for 2016: 61-21 (74%). 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 2:55 p.m. EST.

I hereby disclose that I will be participating in the following trade(s).

 

MGM Resorts International (MGM, $24.90, up $0.26)

MGM September 25 calls (MGM160916C00025000, $0.76, up $0.11)

Entry Price: $0.70 (8/8/2016)

Exit Target: $1.40

Return: 9%

Stop Target: None

Action: Resistance is at $24.75-$25. The 52-week high for MGM is at $25.29. Support is at $24.25-$24, followed by $23.75 and the 50-day moving average.

 

Bank of America (BAC, $15.14, up $0.01)

BAC September 15 calls (BAC160916C00015000, $0.50, up $0.01)

Entry Price: $0.50 (8/8/2016)

Exit Target: $1.00

Return: 0%

Stop Target: None

Action: Resistance is at $15.25-$15.50. Support is at $15-$14.75, followed by $14.50 and the 200-day moving average.

 

Rambus (RMBS, $13.78, up $0.19)

RMBS September 14 calls (RMBS160916C00014000, $0.39, up $0.07)

Entry Price: $0.40 (8/1/2016)

Exit Target: $0.80

Return: -2%

Stop Target: None

Action: Resistance is at $13.75-$14. A move above the latter would be bullish. Support is at $13.50-$13.25.

 

Vuzix (VUZI, $7.19, down $0.05)

VUZI September 10 calls (VUZI160916C00010000, $0.30, down $0.01)

Entry Price: $0.97 (7/27/2016)

Exit Target: $2.00

Return: -69%

Stop Target: None

Action: Support is at $7.25-$7 and the 50-day moving average. Resistance is at $7.50-$7.75.

 

Viavi Solutions (VIAV, $7.34, up $0.09)

VIAV September 7 calls (VIAV160916C00007000, $0.55, up $0.03)

Entry Price: $0.55 (6/23/2016)

Exit Target: $1.10

Return: 0%

Stop Target: None

Action: Shares have traded to a 52-week high of $7.37 today, with fresh resistance being established at $7.25-$7.50. Support is at $7, with $6.90-$6.85 and the 50-day moving average serving as backup. Earnings are due out Thursday.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options