Mid-Market Update for 1/5/2017

Twillio (TWLO) Shares Stay Volatile/ Profit Alert (SNE)

2:30pm (EST)

Shares of Twillio (TWLO, $27.99, up $0.48) continue to experience wild price swings following its October peak just north of $70. The recent backtest towards $35 in mid-December held a downward sloping 50-day moving average with near-term resistance at $29-$30.

The chart shows near-term support at $27.50-$27 with a close below the latter likely leading to the low $20’s. Shares went public last June at $15 and opened the session at $23.99. The original IPO offering was in the $12-$14 range.

In July of 2016, six analysts came out with various ratings for the stock with two Neutral’s and a Hold. The three other analysts gave Outperform, Market Perform and Sector Weight.

The firm that gave a Sector Weight came out this morning with an Outperform rating and called it one of its best “cloud” ideas for 2017. In mid-December, another brokerage firm initiated coverage of the stock with a Buy rating a $45 Price Target.

Negative earnings and sentiment have crushed shares and why I use both technical and fundamental analysis when evaluating an option or stock trade. The future could turn around for the company once they become profitable and they are in a growing space. However, this could take a few more quarters, or perhaps next year, before they become cash-flow positive.

The company recently reported a loss of 4 cents a share on revenue of $71.5 million. Analysts were expecting a loss of 8 cents on revenue of $64.1 million. While they beat on both the top and bottom line, current quarter numbers were given for a 5-6 cent loss on revenue between $72.5-$74.5 million. Estimates were pegged at 6 cents a share loss on revenue of $69.7 million.

While there could be continued momentum and a continued backtest towards $30, this is where I would look to short the stock. This is also assuming this level holds for several session and there is a fade afterwards. If shares close above this level, there may be an opportunity to go long.

To prepare for this event, I have the TWLO February 32 calls (TWLO170217C00032000, $1.40, up $0.10) and the TWLO February 27 puts (TWLO170217P00027000, $2.60, down $0.25) on my Watch List. If shares do make a run to $30, the aforementioned options will also provide an opportunity for a possible “strangle” option trade.

Turning our focus to the market, futures were slightly weak throughout the morning that led to a lower open. The action has been sloppy since as we head into the final 90 minutes of trading.

The Dow is down 52 points to 19,889 while the S&P 500 is off 3 points to 2,267. The Nasdaq is adding 6 points to 5,483 and the Russell 2000 is lower by 15 points to 1,372.

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


Momentum Options Play List

Closed Momentum Options Trades for 2017: 0-0 (0%). 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.


Tower Semiconductor (TSEM, $19.38, down $0.09)

TSEM February 20 calls (TSEM170217C00020000, $0.60, flat)

Entry Price: $0.55 (1/3/2017)
Exit Target: $1.10 (Limit Order on 1/3)
Return: 9%
Stop Target: None

Action: Fresh resistance is at $19.50-$19.75. Support is at $19.25-$19. Wednesday’s high tapped $19.55.


Sony (SNE, $28.73, up $0.15)

January 27.50 puts (SNE170120P00027500, $0.35, flat)

Entry Price: $0.30 (12/23/2016)
Exit Target: $0.60
Return: 17%
Stop Target: None

February 27 puts (SNE170217P00027000, $0.65, flat)

Entry Price: $0.65 (12/23/2016)
Exit Target: $1.30
Return: 0%
Stop Target: None

Action: Close the SNE January 27.50 puts at current levels. The bid/ ask is 35/45 cents so we should easily get filled. These options expire two weeks from tomorrow and are still out-of-the-money. Continue to hold the SNE February 27 puts.

Resistance is at $28.75-$29. Support is at $28.25-$28.


Array Biopharma (ARRY, $8.89, down $0.28)

ARRY March 10 calls (ARRY170317C00010000, $1.00, down $0.10)

Entry Price: $0.85 (12/21/2016)
Exit Target: $1.70
Return: 14%
Stop Target: None

Action: Resistance is at $9-$9.25. Support is at $8.75-$8.50.