Dear Momentum Options Subscriber,
Trading shares of Sony can be gut-wrenching, as the stock tends to make large price moves. Shares are up over 45% this year and set a fresh 52-week high of $29.58 on Monday.
There is little to no Wall Street coverage on the company, as the suit-and-ties hate doing homework on the stock. Sony is based in Japan, but it trades on the NYSE and is still a major tech and mobile player.
As far as its numbers, earnings have been erratic and Sony has missed analyst estimates in the past two quarters. In February, profits of $0.22 a share came up short, as analysts were expecting $0.51 a share. The stock traded higher on the news, however, and added $2.55 on the move from $23.39 to $25.94 following the announcement.
Last October, shares jumped from $18.72 to $19.82 following its earnings release. Sony reported a quarterly loss of $0.19 a share versus expectations for a profit of $0.27 a share.
The company has committed itself to improving its balance sheet, and we will found out how those efforts are going at the end of the month. According to the company’s website, earnings are expected to be released on April 30. The announcements usually come ahead of Wall Street’s open.
Sony’s focus on its channel offering could be a big hit with the recent launch of PlayStation Vue. The service offers live and on-demand TV content over the internet for $49.99 a month. The younger generation is not committing to paying a monthly cable bill, and Sony’s recent offering of the major network stations is a bonus package.
Sony is also trying to improve margins in its movie segment business, and its recent films have performed well.
While the streaming music business continues to be a crowded field, Sony has a booming ecosystem that continues to grow. Given the convenience and lower cost than cable, this unit should make money, but it would be best to improve margins here as well.
Recurring revenue business models can be the bread-and-butter for companies as long as they are in solid uptrends. While Sony has had its share of hits and misses, this dinosaur still makes a lot of cool products and gadgets.
I like the technicals of our current Sony trade more than I do the fundamentals, but Sony’s commitment to improve shareholder value is a bonus.
Earnings trades can be tricky and I rarely take them, but earnings do affect some of my recommendations, depending on when they were opened. The numbers and guidance are what can drive a stock up or down and, in this case, I think Sony’s upcoming numbers will be better than expected.
Heading into the second half of trading, the Dow is up 85 points to 17,966, while the S&P 500 is higher by 6 points to 2,087. The Nasdaq is advancing 26 points to 4,943, and the Russell 2000 is gaining 2 points to 1,262.
I have updated our current trades, so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 31-9-1 (76%). 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 1:15 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.
Sony (SNE, $29.09, down $0.26)
SNE May 31 calls (SNE150515C00031000, $0.70, down $0.05)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: 0%
Stop Target: None
Action: My near-term target is $32, with a shot at $35 on continued momentum. Support is at $28.
Comcast (CMCSA, $58.55, up $0.34)
CMCSA May 60 calls (CMCSA150515C00060000, $1.05, up $0.05)
Entry Price: $1.05 (4/6/2015)
Exit Target: $2.10
Return: 0%
Stop Target: None
Action: A run past $59 should get the 52-week high of $60.70 in play. Support is at $57.75 and the 50-day moving average.
PowerShares QQQ Trust (QQQ, $106.56, up $0.58)
QQQ May 109 calls (QQQ150515C00109000, $0.83, up $0.10)
Entry Price: $0.75 (4/6/2015)
Exit Target: $1.50
Return: 11%
Stop Target: None
Action: The QQQs have reached a peak of $106.70 today. Continued closes above $106 could lead to a run at $108-$110. Support is at $105-$104.
Rigel Pharmaceuticals (RIGL, $4.00, up $0.32)
RIGL June 5 calls (RIGL150619C00005000, $0.45, up $0.05)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 80%
Stop Target: None
Action: Resistance is at $4, followed by the 52-week high at $4.20. Support is at $3.40 but is moving up.
You can read more on this trade in the April 1 Pre-Market Update.
Cypress Semiconductor (CY, $14.05, up $0.08)
CY June 16 calls (CY150619C00016000, $0.40, flat)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -47%
Stop Target: None
Action: Resistance is at $14.25-$14.50. Support is at $13.75 and the 100-day moving average. A close below $13.50 would be bearish.
Trades on Hold — other 2015 Portfolio Open positions (4): 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.
Yahoo! (YHOO) April 47 calls (from February 2015) — Continue to hold.
Marvell Technology (MRVL) May 18 calls (from February 2015) — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Continue to hold.
Gogo (GOGO) April 23 calls (from March 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options