Dear Momentum Options Subscriber,
This will be an incredible week for earnings, as the heart of first-quarter earnings season begins to wind down and the month of April comes to a close.
There are at least a dozen companies I would love to talk about today, but GoPro (GPRO, $46.16, up $0.97) and Twitter (TWTR, $51.16, down $0.50) will garner the most headlines in after-hours trading tonight.
GoPro is expected to report earnings of $0.18 a share on revenue of $341 million. Twitter is forecasted to report earnings of $0.04 share on revenue just shy of $457 million.
Another company I’m more interested in is GrubHub (GRUB, $44.82, down $2.36). Shares made a run at their 52-week peak of $47.95 on this morning’s open, but they have since retreated and are down 5%.
The company has beaten estimates in three of the past four quarters, and the one quarter they missed was by $0.03. The company beat estimates by a $0.05, $0.05 and $0.04 in the other three quarters.
An earnings miss or lowered guidance could cause shares to fall back to the low $40s. A push towards $50 and blue-sky territory is also possible on a good earnings report. In other words, I’m expecting shares to make an 8%-10% move on top of today’s 6% swing.
In March, the company gave a rosy first-quarter outlook, as it said on its conference call that revenue would come in at $84-$86 million. Wall Street had penciled in revenue of $84.7 million, but estimates are now at $85.44 million for the quarter.
GrubHub also raised 2015 revenue guidance to $343-$358 million back in March, up from a previous forecast of $335-$350 million. This was also above the suits-and-ties’ numbers north of $348 million on average.
I have been on the GrubHub train since the low $40s and would love to see shares shoot past $50. The company has great brand awareness and a leading competitive position in the sector. The company announced last week it would have a seamless app ready for the Apple Watch in the near future.
It was nice of GrubHub to provide raised guidance last quarter, and I wouldn’t be surprised if they do it again this time around. The sandbagging game can be fun to play if a company knows business is good and it reports above the higher end of the range. If not, management overestimated its business model and looks silly.
My last trade in GrubHub calls in February made over 40% for the portfolio, but that was ahead of the company’s last earnings release. While I will likely sit out playing the earnings musical charades, I did take a peek at the GRUB May 50 calls (GRUB150515C00050000, $0.50, down $0.50). These calls are down 50% and look tempting to play.
However, the calls are a little pricey given today’s pullback, which is another reason I will remain on the sidelines.
As far as the indexes, the Dow is up 72 points to 18,110, while the S&P 500 is gaining a six-pack to 2,115. The Nasdaq is higher by a dozen points to 5,072, and the Russell 2000 is advancing 7 points to 1,260.
I have two New Trades for us this afternoon, so let’s get to it.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 44-13-1 (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 1:30 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.
New Trades
Krispy Kreme Doughnuts (KKD, $19.29, up $0.16)
Buy to open the KKD June 17 puts (KKD150619P00017000, $0.35, down $0.05) at current levels.
I like these put options at current levels. I will provide the parameters of the trade in tomorrow’s Pre-Market Update. These are the regular monthly options that expire on June 19.
iShares Russell 2000 (IWM, $125.16, up $0.69)
Buy to open the IWM May 127 calls (IWM150515C00127000, $0.70, up $0.20) at current levels.
I like these options at current levels. I will provide the parameters of the trade in tomorrow’s Pre-Market Update. These are the regular monthly options that expire on May 15.
Current Trades
Opko Health (OPK, $14.68, up $0.29)
OPK June 16 calls (OPK150619C00016000, $0.50, up $0.10)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00
Return: 0%
Stop Target: None
Action: Support is at $14.50-$14.25 and the 50-day moving average. The 52-week high is at $15.23, and a close above this level should lead to a run a $16-$17 over the near term. Earnings are due out the second week of May.
Freeport-McMoRan (FCX, $22.70, up $0.88)
FCX June 23 calls (FCX150619C00023000, $1.10, up $0.30)
Entry Price: $0.55 (4/27/2015)
Exit Target: $1.60 (closed first half at $1.10 on 4/28/2015)
Return: 100%
Stop Target: $0.90 (Stop Limit)
Action: Shares have traded to a high of $22.82 today, with the options reaching a peak of $1.23. The low has been $0.97. The Stop Limit is at $0.90 on the second half of the trade.
The 100% return in two days was too good to pass up, which is why I locked in profits. Near-term resistance is at $23-$24. Fresh support will try to hold at $22.
TiVo (TIVO, $11.35, up $0.06)
TIVO June 12 calls (TIVO150619C00012000, $0.40, flat)
Entry Price: $0.30 (4/24/2015)
Exit Target: $0.90
Return: 33%
Stop Target: None
Action: Support is at $11-$11.25 and the 50-day moving average. The next layers of resistance are at $11.50-$12, followed by the 200-day moving average.
You can read my full update on TiVo in the April 27 Pre-Market Update. Earnings are due out in late May.
SunPower (SPWR, $33.89, up $0.23)
SPWR June 38 calls (SPWR150619C00038000, $0.75, flat)
Entry Price: $0.95 (4/22/2015)
Exit Target: $1.90
Return: -21%
Stop Target: None
Action: Near-term resistance is at $36. Support is at $34-$33.75.
Earnings are due out on Thursday, April 30, and I covered what to expect in the April 27 Pre-Market Update. This trade will likely make a major move, and I plan to ride the storm out through June. The company’s partnership with Apple (AAPL) is something worth keeping an eye on.
Dot Hill Systems (HILL, $6.61, up $0.10)
HILL September 7.50 calls (HILL150918C00007500, $0.60, up $0.05)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 33%
Stop Target: None
Action: Resistance is at $6.50-$6.75, and a close above the latter would be bullish for a run at $7. Near-term support is at $6.25 on dips below $6.50. Earnings are due out on May 7, and I will cover the company’s numbers next week.
Jabil Circuit (JBL, $23.35, down $0.30)
JBL May 24 calls (JBL150515C00024000, $0.30, down $0.10)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: -50%
Stop Target: None
Action: Near-term support is at $23.50, followed by $23 and the 50-day moving average. Resistance is at $24 and the 52-week high at $24.11. A close above these levels should lead to a run at $25-$26.
Trades on Hold — other 2015 Portfolio Open positions (1): 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.
BlackBerry (BBRY) June 13 calls (from March 2015) — This is a speculation trade from early March on BBRY receiving a takeover offer of $14 or better by mid-June — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options