Mid-Market Update for 7/19/2017

eBay (EBAY) Earnings in Focus

12:55pm (EST)

Shares of eBay (EBAY) have been in a strong uptrend ahead of the company’s earnings announcement that is due after Thursday’s closing bell. The stock touched a 52-week high of $37.20 last week with current resistance at $37.25-$37.50. Rising support is at $36.50-$36 following the strong move above the 50-day moving average earlier this month.

Wall Street is expecting earnings of $0.45 a share on revenue of $2.31 billion for the recently ended quarter. The company has topped estimates by a penny in three of the past four quarters while matching in the other. The high estimate has eBay earning $0.46 a share and would equate to another penny beat. The low forecast is pegged at $0.42 a share for a three-cent miss.

The company has been aggressive in its advertising advertising efforts on television, social media, and billboard with the slogan “Did You Check EBay?” that is doing well. There are reports eBay experienced its two best sales day ever for July during Amazon’s (AMZN) Prime Day week. Any bump in revenue won’t be seen on this earnings report, however, raised guidance could come from management.

My thoughts are the company likely had a strong quarter and will beat estimates by a penny, or two, on higher-than-expected revenues. An earnings miss could slow momentum in the stock. The average daily post-earnings moves over the past two years in EBAY has been 7.9%.

The EBAY August 38 calls (EBAY170818C00038000, $1.00, up $0.10) can be targeted by bullish traders looking for a push towards, or past, the $40 level in the stock. If shares trade above $40, technically, by August 18th, the aforementioned call options would double from current levels.

The EBAY August 36 puts (EBAY170818P00036000, $0.95, down $0.05) can be targeted by bearish traders looking for a possible earnings miss, or lowered guidance. These options would double from current levels if shares fall below $34.10 by mid-April.

Both call and put options, together, would create a strangle option trade for roughly $2. The breakeven points would be for the stock to trade to $40, or fall to $34. A double would occur if shares clear $42, or fall below $32 as the calls or puts would be $4 in-the-money. If shares stay between $36-$38 until August 18th, both options would expire worthless.

I’m more of a directional trader, and while I like the calls more than the puts, I will likely remain on the sidelines. Earnings trades are tricky and a lot has to go right to get the desired payoff. However, I wouldn’t be surprised to see shares clear $40 as they look slightly undervalued at current levels.

Turning our focus towards the market, the indexes are once again pushing all-time highs heading into the second half of trading. The Dow is up 24 points to 21,598 while the S&P 500 is gaining 9 points to 2,469. The Nasdaq is advancing 37 points to 6,382 and the Russell 2000 is higher by 11 points to 1,438.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 39-15 (74%). 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 a Trade Alert outside of these time frames.


Cypress Semiconductor (CY, $14.55, up $0.11)

CY August 15 calls (CY170818C00015000, $0.55, flat)

Entry Price: $0.40 (7/12/2017)
Exit Target: $0.80
Return: 38%
Stop Target: None

Action: Resistance is at $14.50-$14.75. Support is at $14.25-$14.


Wendy’s (WEN, $15.70, up $0.26)

WEN August 16 calls (WEN170818C00016000, $0.45, up $0.05)

Entry Price: $0.45 (7/12/2017)
Exit Target: $0.90
Return: 0%
Stop Target: None

Action: Resistance is at $15.75-$16. Support is at $15.50-$15.25.


Bank of America (BAC, $23.87, down $0.03)

BAC August 25 calls (BAC170818C00025000, $0.20, flat)

Entry Price: $0.75 (7/3/2017)
Exit Target: $1.50
Return: -73%
Stop Target: 10 cents (Stop Limit)

Action: Support is at $23.75-$23.50. Resistance is at $24-$24.25.


AT&T (T, $35.99, flat)

T August 37 puts (T170818P00037000, $1.35, flat)

Entry Price: $0.78 (6/29/2017)
Exit Target: $1.60
Return: 73%
Stop Target: $1.20 (Stop Limit)

Action: Support is at $35.75-$35.50. Resistance is at $36-$36.25.


TherapeuticsMD (TXMD, $5.34, up $0.08)

TXMD August 7.50 calls (TXMD170818C00007500, $0.25, flat)

Entry Price: $0.50 (6/22/2017)
Exit Target: $1.00
Return: -50%
Stop Target: None

Action: Resistance is at $5.50. Support is at $5.25-$5.


iPath S&P 500 VIX Futures (VXX, 11.41, down 0.13)

VXX August 14 calls (VXX170818C00014000, $0.30, flat)

Entry Price: $1.20 (6/15/2017)
Exit Target: $2.40
Return: -75%
Stop Target: None

Action: Support is at 11.50-11.25. Resistance is at 11.75-12.