Dear Momentum Options Subscriber,
Shares of Finisar (FNSR, $29.30, up $0.37) have been on fire since making a low of $15.21 back on May 19. The rebound can be attributed to back-to-back quarters of solid earnings reports, with the most recent quarterly results earlier this month coming in $0.08 ahead of estimates. Revenues were also higher at $341 million versus forecasts for a reading of $332 million. During the prior three quarters, earnings topped expectations by $0.04, $0.03 and $0.02.
FNSR also provided current-quarter guidance of $0.44-$0.50 a share versus the average forecast for $0.32 a share by the 12 analysts that cover the stock. All of them have raised their EPS forecasts over the past 30 days, along with a number of price target increases.
The company said it expects to generate second-quarter revenue of $355-$375 million compared to estimates for a figure just under $343 million. FNSR also estimated that gross margins will be about 34%.
The chart below shows a three-year breakout above the prior resistance level at $28, which now represents short-term support. The recent 52-week high was at $29.25, and the blue-sky breakout is forecasting a run to $30-$32 by mid-November. However, a close back below $28 would be a bearish development.
Shares zoomed from $23.23 to close at $26.20 on volume topping 13 million shares following the last earnings update. Piper Jaffray raised its price target to $31 from $24 following the impressive quarter. Another analyst did $3 better and raised their target from $24 to $34. Finally, Stifel hiked its target to $33 from $28.
The next earnings announcement will come in early December, so this headline risk won’t affect our trade going forward. Additional business deals and momentum should get the low $30s in play on a breakout above $29.25.
The Dow is currently higher by 104 points to 18,398, while the S&P 500 is gaining 11 points to 2,174. The Nasdaq is up 34 points to 5,329, and the Russell 2000 is climbing 10 points to 1,255.
I have updated our current trades below, and I have also set the parameters for our Finisar (FNSR) trade from this morning. I could have additional Trade Alerts or New Trades throughout the day, so stay locked and loaded into the closing bell in case I take additional action.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 72-24 (75%). 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 12:25 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Finisar (FNSR, $29.30, up $0.37)
FNSR November 30 calls (FNSR161118C00030000, $1.25, up $0.17)
Entry Price: $1.20 (9/22/2016)
Exit Target: $2.40
Stop Target: $0.60
Action: The Exit Target for the trade is at $2.40, but it is not a Limit Order at this time. The Stop Target for the trade is at $0.60, but it is not a Stop Limit order at this time.
Near-term resistance is at $29.25-$29.50. My near-term target is $32-$33 by mid-November on a move above $30. Support is at $29-$28.75.
Kroger (KR, $30.73, down $0.11)
KR October 30 puts (KR161021P00030000, $0.45, up $0.05)
Entry Price: $0.78 (9/7/2016)
Exit Target: $1.60 (Limit Order on first half)
Stop Target: $0.20 (Stop Limit)
Action: Support is at $30.75-$30.50, and the 52-week low is at $30.45. Resistance is at $31-$31.25.
Vuzix (VUZI, $8.82, up $0.08)
VUZI October 10 calls (VUZI161021C00010000, $0.35, flat)
Entry Price: $0.68 (9/7/2016)
Exit Target: $1.40
Stop Target: $0.25 (Stop Limit)
Action: Resistance is at $8.75-$9. Support is at $8.50-$8.25.
Viavi Solutions (VIAV, $7.46, up $0.09)
VIAV December 8 calls (VIAV161216C00008000, $0.26, flat)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15 (Stop Limit)
Action: Resistance is at $7.50-$7.75. Support is at $7.20-$7.15 and the 200-day moving average.
Editor and Chief Options Strategist