Dear Momentum Options Subscriber,
Although first-quarter earnings season doesn’t officially start until next week, former Dow component Alcoa (AA, $13.64, up $0.21) will announce its numbers after the bell today. The call options have been active this week, as bullish traders are betting on a move past $14.
Wall Street is expecting $0.26 a share on revenue of $5.94 billion. Obviously, a beat-and-raise quarter would be a nice signal on how next week and the January-March quarter went for other companies.
Commodities prices have taken it on the chin for much of 2015 but have bounced back in recent weeks. Alcoa’s numbers have been cyclical and unpredictable in recent years, but they have topped Wall Street’s estimates in the past four quarters.
An earnings miss could send shares stumbling towards their 52-week low of $12.34. A rosy quarter, along with a bustling outlook for the rest of 2015, could send shares zooming past $14 and pushing $15. The 52-week high is at $17.75.
Dividend-seekers won’t be attracted to the stock’s paltry 1% yield ($0.12 annually), and the chart is a mess. There were two “death crosses” that formed in March, with the 50- and 100-day moving averages falling below the 200-day moving average.
The AA May 13 puts (AA150515P00013000, $0.35, down $0.05) look tempting as a bearish play and a bet on fresh one-year lows.
The AA May 14 calls (AA150515C00014000, $0.45, up $0.05) can be used to create a strangle option trade or as a bullish bet for a run to the mid-teens.
Pier 1 Imports (PIR, $12.65, down $0.03) will also announce its results after today’s close, along with WD-40 Co. (WDFC, $86.67, down $0.31).
Constellation Brands (STZ, $119.66, up $1.39), PriceSmart (PSMT, $84.82, down $0.29), Ruby Tuesday (RT, $6.45, up $0.05) and Walgreens Boots Alliance (WBA, $87.54, up $0.26) head up Thursday’s notable players.
There are no marquee companies announcing numbers on Friday, but there could be a surprise earnings warning or two if companies think they will miss estimates. However, earnings warnings don’t happen often or as often as they should, as corporate management teams would rather let Wall Street decide the fate of their stocks.
I will likely refrain from trading any of the aforementioned names on earnings, but I do see some opportunities coming up in the next week or two.
Heading into the second half of trading, the Dow is up 19 points to 17,895, while the S&P 500 is higher by 4 points to 2,080. The Nasdaq is gaining 33 points to 4,944, and the Russell 2000 is adding 8 points to 1,261.
Now let’s go check on our trades.
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 1:45 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.
Rambus (RMBS, $13.61, up $0.71)
RMBS May 13 calls (RMBS150515C00013000, $1.00, up $0.28)
Entry Price: $0.58 (4/7/2015)
Exit Target: $1.20
Return: 72%
Stop Target: None
RMBS August 15 calls (RMBS150821C00015000, $0.65, up $0.16)
Entry Price: $0.47 (4/7/2015)
Exit Target: $1.00-$1.25
Return: 38%
Stop Target: None
Action: Sell to close the first half of the position in the RMBS May 13 calls at current levels to lock in profits. Continue to hold the RMBS August 15 calls.
Shares have traded to a high of $13.64 today. Continued closes above $13 could lead to a quick run to $13.75-$14. Support is at $12.75-$12.50.
Sony (SNE, $29.39, up $0.42)
SNE May 31 calls (SNE150515C00031000, $0.65, up $0.10)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: -7%
Stop Target: None
Action: Support is at $28.50-$28. My near-term target is $32, with a shot at $35 on continued momentum.
Comcast (CMCSA, $58.71, up $0.40)
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: Today’s high has reached $58.77. 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, $106.46, up $0.66)
QQQ May 109 calls (QQQ150515C00109000, $0.80, up $0.10)
Entry Price: $0.75 (4/6/2015)
Exit Target: $1.50
Return: 7%
Stop Target: None
Action: Continued closes above $106 could lead to a run at $108-$110. Support is at $105-$104.
Rigel Pharmaceuticals (RIGL, $3.88, up $0.07)
RIGL June 5 calls (RIGL150619C00005000, $0.45, flat)
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 $3.60, followed by $3.40 on a drop back below $3.80-$3.75.
You can read more on this trade in the April 1 Pre-Market Update.
Cypress Semiconductor (CY, $13.97, 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: Support is at $13.75 and the 100-day moving average. A close below $13.50 would be bearish. Resistance is at $14-$14.25.
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