Dear Momentum Options Subscriber,

With its tight margins and the number of chains competing in the sector, the grocery business is very competitive. Kroger (KR, $31.30, down $1.37) has become a top-five chain, for the most part, and the company is scheduled to announce earnings ahead of Friday’s opening bell.

Before I cover the fundamentals, the chart looks nasty, as all of the major moving averages are in a downtrend. Resistance is now at $31.50-$32 given today’s pullback. Short-term support is at $31-$30.50. Today’s 52-week low has tapped $31.10, and there is risk to the mid- to high $20 range if earnings come in shy of expectations or if the company issues lowered guidance.

KR has topped estimates during the past four quarters by $0.01, $0.03 and $0.04 twice, respectively. However, revenues came up short of forecasts during the past three quarters and just met expectations in the year-ago quarter.

Wall Street has penciled in a profit of $0.45 a share for the recently ended quarter and is looking for revenue to come in just under $26.8 billion. The high estimate is at $0.47 a share on $27.57 billion in revenue, while the lowball number is at $0.44 on revenue of $26.33 billion.

My guess is that the company will do its best to at least match expectations, or it could beat estimates by a penny. However, I think the trend of missing revenues could hurt Kroger this time around, which could send shares to fresh 52-week lows south of $30.

I have mostly stayed long over the summer by using call options, but I had no problem adding this “short” position when I saw the potential for lower lows to come into play.

A quick look at the market shows that the Dow is down 35 points to 18,502, while the S&P 500 is lower by 3 points to 2,182. The Nasdaq is slipping 3 points to 5,272, and the Russell 2000 is up 2 points to 1,255.

I have updated our current trades below, and I also have another Profit Alert for our position in T-Mobile (TMUS), so let’s go check out the action.

Momentum Options Play List

Closed Momentum Options Trades for 2016: 67-23 (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 1:20 p.m. EST.

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

 

T-Mobile (TMUS, $46.67, down $0.54)

TMUS October 48 calls (TMUS161021C00048000, $1.05, down $0.18)

Entry Price: $1.00 (9/1/2016)

Exit Target: $2.00

Return: 5%

Stop Target: $1.05 (Stop Limit)

Action: The Stop Limit at $1.05 was triggered this morning, as shares traded to a low of $46.44 today, and we are now out of the position.

 

Kroger (KR, $31.30, down $1.37)

KR October 30 puts (KR161021P00030000, $0.80, up $0.40)

Entry Price: $0.78 (9/7/2016)

Exit Target: $1.60

Return: 3%

Stop Target: None

Action: The Exit Target for the trade is at $1.60, but it is not a Limit Order at this time. There is no Stop Target at this time.

Support is at $31-$30.50 on continued weakness. Resistance is at $31.50-$32.

 

Vuzix (VUZI, $8.95, down $0.05)

VUZI October 10 calls (VUZI161021C00010000, $0.75, up $0.05)

Entry Price: $0.68 (9/7/2016)

Exit Target: $1.40

Return: 10%

Stop Target: None

 

VUZI October 7.50 calls (VUZI161021C00007500, $1.90, up $0.11)

Entry Price: $0.95 (8/23/2016)

Exit Target: $2.50

Return: 100%

Stop Target: $1.40 (Stop Limit)

Action: Today’s high has reached $9.18. Resistance is at $9-$9.25. The 52-week peak is at $9.30. My near-term price target is $10+. Support is at $8.75-$8.50.

 

Sotheby’s (BID, $40.12, down $0.07)

BID October 37 puts (BID161021P00037000, $0.94, up $0.08)

Entry Price: $1.05 (9/1/2016)

Exit Target: $2.10

Return: -10%

Stop Target: None

Action: Support is at $39.50-$39. Resistance is at $40-$40.25.

 

Nucor (NUE, $49.78, up $0.20)

NUE October 52.50 calls (NUE161021C00052500, $0.55, flat)

Entry Price: $0.63 (8/25/2016)

Exit Target: $1.30

Return: -13%

Stop Target: $0.30 (Stop Limit)

Action: Resistance is at $50-$50.25 and the 100-day moving average. Support is at $48.50-$48.

 

Viavi Solutions (VIAV, $7.85, up $0.03)

VIAV December 8 calls (VIAV161216C00008000, $0.49, up $0.01)

Entry Price: $0.51 (8/19/2016)

Exit Target: $1.05

Return: -4%

Stop Target: None

Action: Support is at $7.75-$7.50. Resistance is at $8.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options