Dear Momentum Options Subscriber,
Shares of TiVo (TIVO, $11.58, up $0.33) are up 3% today and have traded to a high of $11.92 following a better-than-expected quarter.
The company reported a profit of $0.07 a share on revenue of $114 million. The suit-and-ties were looking for earnings of $0.04 a share on sales near $90 million.
I mentioned that the stock had a great shot at clearing $12 if the company knocked the cover off the ball. Given these results, I would say TiVo smashed it out of the ballpark. The problem is that shares stalled at $12 on the open.
Video content continues to explode across smartphones and tablets, as people in the everyday world want TV and video/sports everywhere and in real time. TiVo’s array of streaming DVR (digital video recorder) products are being well received, as subscriptions were up 30% year-over-year.
The company’s total subscription base rose 340,000 for the recently ended quarter. Wall Street was looking for TiVo’s subscriber additions to come in at 328,000 during the fourth-quarter. For 2015, the company added 1.3 million users and now has 5.5 million paying customers.
TiVo’s products work much like the Sling Media SlingPlayer, which is something I have used over the years to watch live TV on the go. Dish Network (DISH) has its Hopper, and there are other competitors in the industry. TiVo’s earnings results are even more impressive given the crowded playing field.
The beauty of all of these devices and the “internet of things” is that users are able to watch live and recorded shows from anywhere. I mentioned that TiVo has a nice portfolio of intellectual properties and that was proven in their earnings results. They continue to expand their customer base through partnerships and distribution deals with the cable operators and satellite providers, which is why I believe TiVo is a takeover target at some point down the road.
With video-on-the-go continually increasing, I said that TiVo is king when it comes to managing video content. I also mentioned that shares could trade to $16-$17 this year (or next), but there are several layers of resistance ahead starting with $12 and followed by $12.50-$13. If shares clear the upper end of this range, a run past $14 and the 52-week high peak of $14.29 is possible. Fresh support is at $11.50-$11.25 if the current gains fade.
I took advantage the run into earnings and today’s nice pop by playing the TIVO May 12 calls (TIVO150515C00012000, $0.60, flat). They have traded to a high of $0.74, but I was looking for a pop past $0.85-$1.00 on the good news.
I mentioned that I wanted to close the trade on a possible breakout past $12. The trade made us 43% from my recommended entry price and, while it was tempting to keep the trade open, I mentioned that I wanted to be in and out of the position before and after the earnings announcement.
While I still like the trade, I knew I didn’t want to marry the position longer-term going into the news and given the risk of the earnings announcement. Although TiVo delivered, I always stick to my number one rule for trading, and that is “plan the trade, trade the plan.”
I will continue to keep an eye on TiVo and its share price for another possible re-entry point, but, for now, I’ve locked in profits on the good news. A clear signal to go long again will be when TiVo cracks $12, so stay tuned.
Elsewhere, Smith & Wesson Holding (SWHC, $14.43, up $1.28) shares are surging 10% following the release of its quarterly results.
The company reported a profit of $0.20 a share on revenue north of $130 million. Analysts were looking for earnings of $0.11 a share on revenues of $128 million.
The SWHC June 15 calls (SWHC150619C00015000, $0.85, up $0.25) were going for $0.60 during Tuesday’s pullback and have reached a peak of $0.90. This would have made for a nice 50% round-trip return in a day.
This wasn’t an official trade, as I didn’t want to have two earnings trades going into this morning’s open. I don’t take too many earnings trades, but, when I do, I like to be quick about it.
As far as the market, the bears are in charge as the market makes the turn. The Dow is down 82 points to 18,121, while the S&P 500 is lower by 8 points to 2,099. The Nasdaq is off 10 points to 4,969, and the Russell 2000 is declining 3 points to 1,231.
Now let’s go check on the current trades.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 19-2-1 (86%). 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.
Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.
Atmel (ATML, $8.58, down $0.04)
ATML May 9 calls (ATML150515C00009000, $0.40, down $0.05)
Entry Price: $0.40 (3/4/2015)
Exit Target: $1.00
Return: 0%
Stop Target: None
Action: Resistance is at $8.75-$9. Support is at $8.25-$8.
Gogo (GOGO, $19.54, up $0.07)
GOGO May 20 calls (GOGO150515C00020000, $1.40, flat)
Entry Price: $0.85 (3/2/2015)
Exit Target: $2.25 (Limit Order on Half)
Return: 65%
Stop Target: None
Action: Short-term resistance is at $20. If cleared, a run to $22 is possible. Near-term support is moving up and will try to hold at $19.25-$19 on a pullback.
BlackBerry (BBRY, $10.78, down $0.19)
BBRY June 13 calls (BBRY150619C00013000, $0.55, down $0.05)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20
Return: -8%
Stop Target: None
Action: Support is at $10.75 on continued weakness. Resistance is at $11 over the near term.
Yahoo! (YHOO, $43.45, up $0.83)
YHOO April 47 calls (YHOO150417C00047000, $0.55, up $0.15)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -31%
Stop Target: None
Action: Resistance is at $44. Support is at $43-$42.
Western Union (WU, $19.71, down $0.01)
WU April 20 calls (WU150417C00020000, $0.35, flat)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -3%
Stop Target: None
Action: Support is at $19.50. Additional help is at $19.25-$19. Resistance is at $19.75-$20.
American Express (AXP, $81.05, down $0.86)
AXP April 87.50 calls (AXP150417C00087500, $0.30, down $0.10)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -46%
Stop Target: None
Action: Support is at $82-$81.50, with backup at $80. Resistance is at $82.59-$83.
Flextronics (FLEX, $12.00, up $0.08)
FLEX April 12 calls (FLEX150417C00012000, $0.40, flat)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -40%
Stop Target: None
Action: Support is at $11.75. Resistance is at $12-$12.25.
You can read my thoughts on FLEX in Tuesday’s Pre-Market Update.
Marvell Technology (MRVL, $16.08, up $0.08)
MRVL May 18 calls (MRVL150515C00018000, $0.25, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -50%
Stop Target: None
Action: Near-term support is at $15.75-$15.50 and the 50-day moving average. Resistance is at $16.25-$16.50.
Brocade Communications Systems (BRCD, $12.50, up $0.11)
BRCD March 13 calls (BRCD150320C00013000, $0.10, flat)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -58%
Stop Target: None
Action: Support is at $12.25-$12, followed by the 50-day moving average. Resistance is at $12.75-$13.
JDS Uniphase (JDSU, $13.33, down $0.18)
JDSU March 14 calls (JDSU150320C00014000, $0.20, down $0.05)
Entry Price: $0.78 (1/8/2015)
Exit Target: $1.00
Return: -74%
Stop Target: None
Action: Support is at $13.40 and the 50-day moving average on a pullback. The breakeven point for the trade is at $14.78. This is one of our longest running trades, and I would like to see a close above $14 this week.
Trades on Hold — other 2015 Portfolio Open positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.
Philip Morris (PM) March 75 puts (From January 2015) — Continue to hold.
AT&T (T) March 36 calls (From February 2015) — Support is at $34 and the 200-day moving average. Resistance is at $34.75-$35 — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options