Dear Momentum Options Subscriber,
Shares of Rave Restaurant Group (RAVE, $2.84, up $0.06) continue to disappoint investors this year, as they have traded to a fresh 52-week low $2.72 this morning. This once-high-flying, small-cap stock came into the year at $6.39 and has since lost approximately 56% of its value at current levels. As you can see from the three-year chart below, shares reached an all-time high of $16.20 on March 12, 2015, but continued losses and changes in management have not been a winning formula for a higher stock price.
The roughly 83% pullback from the lifetime high might be considered a discount, but RAVE would need to stem its losses in future quarters before I would consider committing new money to the stock. In late September, the company reported a loss of $0.22 a share on revenue of $15.7 million. Analysts had expected a $0.06 loss.
That was the third-straight quarterly loss this year, with the company posting losses of $0.12 and $0.45 a share during the prior two quarters. In the year-ago period, the company posted a $0.05 loss per share. This means that over the past year, RAVE has lost $0.84 a share, or $8.9 million, on revenue just over $60 million.
Rave recently hired a temporary CEO, Clinton Coleman, who replaced Randy Gier. While I had high hopes for its past CEO, its new short-term chief has inherited a mess. A successor could come by year-end, however, as the company has hired a search firm to find a permanent CEO.
Operational issues have severely hurt the company’s bottom line and seem to be affecting sales and enthusiasm for the company’s revolutionary pizza concept.
Good fast-casual food, low prices and a new concept don’t always guarantee success, and the wider-than-expected losses are no excuse for a company that has been in business for decades. A national ad campaign this fall might help with sales, but investors should avoid the stock until losses improve and revenues start to increase.
On a broader economic note, this morning’s jobs report disappointed, as payrolls increased by just 156,000 in September. Analysts were expecting a print that showed 172,000 jobs were added. Additionally, the unemployment rate rose from 4.9% to 5%.
Given today’s pullback in the market, the bears are on track to win the week, providing there’s not a major rebound into the close. The Dow is down 82 points to 18,186, while the S&P 500 is declining 12 points to 2,148. The Nasdaq is falling 33 points to 5,273, and the Russell 2000 is off 13 points to 1,232.
I have updated our current trades below and, while I was looking to get us into a New Trade today, it’s probably best to wait until next week, which is when I expect a clearer trend to emerge. I will be back on Monday morning with a full update, but, until then, have a great and safe weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 74-25 (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 12:55 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Kroger (KR, $29.12, down $0.25)
KR November 27.50 puts (KR161118P00027500, $0.40, up $0.04)
Entry Price: $0.50 (10/4/2016)
Exit Target: $1.00
Stop Target: None
Action: Near-term support is at $29.25-$29. Resistance is at $29.50-$29.75.
Halozyme Therapeutics (HALO, $11.90, down $0.22)
HALO November 13 calls (HALO161118C00013000, $0.75, down $0.10)
Entry Price: $1.07 (9/27/2016)
Exit Target: $2.15
Stop Target: $0.55 (Stop Limit)
Action: Near-term support is at $12-$11.75. Resistance is at $12.25-$12.50.
Goodyear Tire & Rubber (GT, $32.77, down $0.09)
GT October 33 calls (GT161021C00033000, $0.57, down $0.11)
Entry Price: $0.75 (9/22/2016)
Exit Target: $1.50
Stop Target: $0.30 (Stop Limit)
Action: Support is at $32.75-$32.50. Resistance is at $33. The company is scheduled to announce earnings during the last week of the month.
Viavi Solutions (VIAV, $7.28, down $0.10)
VIAV December 8 calls (VIAV161216C00008000, $0.22, flat)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15 (Stop Limit)
Action: Support is at $7.25-$7.20. Resistance is at $7.45-$7.50 and the 50-day moving average. Earnings are due to be released during the first week of November.
Editor and Chief Options Strategist