Mid-Market Update for 2/22/2017

3D Systems (DDD) Trying to Turn Corner/ Profit Alerts (FLEX, VIAV)

2:05pm (EST)

Like most enthusiasts of 3D printing, I find it fascinating to see what can be made with this technology. Although some applications have caused an uproar, like creating a gun, or possible human organs, the technology is still improving and like most sectors, offers its shares of hit and misses.

One company I have followed for years is 3D Systems (DDD, $16.93, down $0.31) and a stock I like to follow for possible option trades. The company will report earnings next week and Wall Street will want to see continued momentum following two-straight earnings beat.

Currently, there are 16 analysts that follow the company with nine rating the stock a “Hold”. There are two “underperform” and two “sell” ratings along with two Strong Buys and one Buy recommendation.

Going back the past four quarters, 3D Systems has topped estimates in three of them by five and six cents along with a 16-cent beat in the year-ago quarter. Sandwiched in between was a match for a five-cent profit.

Meanwhile, revenues have missed forecasts the past three quarters but came in higher for last February’s Q4 results. This is a slightly troubling sign as it is better see a company consistently beating profit estimates on better-than-expected revenues instead of misses. However, upcoming fourth-quarter numbers could bring another surprise earnings beatLong with a breakout towards $19-$20.

DDD shares made a 10% intraday move higher, from $13.07 to $14.44, last November on the earnings announcement and surged over 10% last August, from $12.18 to $14.80, intraday. In May 2016, shares fell from $14.51 on the previous session to close at $13.58 on the earnings announcement. And finally, last March, shares surged 25%, from $11.55 to $14.45.

The chart below shows near-term resistance at $17.50-$17.75 with a close above the latter a bullish development on a multi-month breakout. The October 2016 double-top occurred at the $18.50 level and the 52-week peak is at $19.76. Near-term support is at $17-$16.50.

Obviously, with a previous track record of an 8% move lower, two 10+% trips higher, and a sizzling 25% higher pop, shares will likely move double-digit percentage points when the company announces earnings, next Monday.

There are weekly and monthly options available to trade on 3D Systems, but weekly options carry wider bid/ask prices, and volume tends to be lighter. The regular DDD March 18 calls (DDD170317C00018000, $0.45, down $0.15) are an attractive play for bullish traders looking to capitalize on a possible run towards, or past, the $20 level.

The beauty of this trade is that these options would double from current levels if shares clear $19.30, technically, by mid-March. Even better Cinderella? A 20% surge higher on the upcoming earnings announcement would have shares pushing $21. This would get the aforementioned call options to $3 “in-the-money” and would represent a 350%? Return from current levels.

Of course, there is downside risk as these options would also take a beating if shares fell double-digit percentage points the other way. In fact, they would expire worthless, if shares retreat and stay below $18 into mid-March, or March 17th, technically.

To offset some of the risk, a strangle option trade could be created by using the DDD March 16 puts (DDD170317P00016000, $0.55, up $0.05). These put options would offset some of the gains if shares do trade towards $20 but they would lose value. The aforementioned put options would expire worthless if shares stay above $16 by the March 17th closing bell.

Together, both call and put options, would cost $1.00 to do the strangle on DDD, with break even points at $19, or $15. If shares trade above or below these levels into mid-March, profits can be made. A double on the strangle trade would occur if DDD shares are above $20, or below $14, technically, by March 17th.

With the portfolio off to a tremendous start at 11-2 for 2017, I didn’t add “insurance” to our DDD trade but I wanted to make everyone aware of the risks when trading an earnings announcement. The majority of Wall Street won’t be expecting the news ahead of Monday morning’s open and another reason why I like this trade.

If 3D Systems can come in with a beat-and-raise quarter, along with a rosy outlook going forward, the suit-and-ties might be forced to upgrade, or downgrade, the nine Hold ratings. Either way, I’m more bullish than bearish on DDD and I expect shares to be the talk of the town to start next week.

Turning our focus to the market, trading has been choppy but the action remains bullish. The Dow is up 32 points to 20,775 while the S&P 500 is slipping a point to 2,364. The Nasdaq is off 3 points to 5,863 and the Russell 2000 is down 5 points to 1,405.

I have updated the parameters of the DDD trade and I have Profit Alerts for FLEX and VIAV. Stay locked-and-loaded into the closing bell in case I take additional action.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 11-2 (85%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records.

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 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send an Trade Alerts outside of these time frames.


3D Systems (DDD, $16.93, down $0.31)

March 18 calls (DDD170317C00018000, $0.45, down $0.15)

Entry Price: $0.45 (2/22/2017)
Exit Target: $1.00
Return: 0%
Stop Target: None

Action: Set an Exit Target at $1. There is no Stop Target.

Near-term resistance at $17.50-$17.75 with a close above the latter a bullish development on a multi-month breakout. Near-term support is at $17-$16.50.


Jabil Circuit (JBL, $26.23, up $0.03)

JBL March 26 calls (JBL170317C00026000, $1.05, flat)

Entry Price: $0.65 (2/13/2017)
Exit Target: $1.30
Return: 62%
Stop Target: 80 cents (Stop Limit)

Action: Resistance is at $26.25-$26.50. Near-term support is at $25.75-$25.50 on a move below $26.


Flex (FLEX, $16.68, down $0.11)

FLEX April 17 calls (FLEX170421C00017000, $0.40, down $0.05)

Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Return: 14%
Stop Target: None

FLEX March 16 calls (FLEX170317C00016000, $0.80, down $0.10)

Entry Price: $0.40 (2/10/2017)
Exit Target: $1.10
Return: 100%
Stop Target: 70 cents (Stop Limit)

Action: Close half of the March 16 calls at current levels.

Support is at $16.50-$16.25. Resistance is at $17-$17.25.


Viavi Solutions (VIAV, $10.53, down $0.21)

VIAV March 10 calls (VIAV170317C00010000, $0.70, down $0.15)

Entry Price: $0.40 (2/8/2017)
Exit Target: $1.20
Return: 75%
Stop Target: 70 cents (Stop Limit)

VIAV March 9 calls (VIAV170317C00009000, $1.70, down $0.10)

Entry Price: $0.50 (1/25/2017)
Exit Target: $2.00 (Limit Order on third)
Return: 240%
Stop Target: $1.60 (Stop Limit)

Action: The Stop Limit on the VIAV March 10 calls has tripped. Close the March 9 calls at current levels. We can revisit VIAV if current support at $10.50 holds.


TherapeuticsMD (TXMD, $5.55, down $0.04)

TXMD June 7.50 calls (TXMD170616C00007500, $0.45, flat)

Entry Price: $0.75 (1/18/2017)
Exit Target: $1.50
Return: -40%
Stop Target: None

Action: Support is at $5.50-$5.40 with additional help at $5.25-$5. Resistance is at $6.