MomentumOptions.com Mid-Market for 2/7/2018
Canada Goose Holdings (GOOS) Earnings on Deck
1:45pm (EST)
Shares of Canada Goose Holdings (GOOS) could be setting up for a huge price swing on Thursday with earnings due out before the bell. The company went public in March 2016 after pricing 20 million shares at just below $12.78.
The stock soared over 40% after opening at $18 before locking in a 26% gain on the first day of trading. In going public, the company raised about $255 million in U.S. dollars.
A week afterwards, a well-know financial publication, said shares were “richly priced” and that the parka maker was a one-trick pony with potential fashion risk. With shares pushing $40 and showing a strong technical setup, Barron’s has obviously been on the wrong side of a triple-digit winner, so far.
Consumers have ignored the jacket prices easily north of $1,000 as the company reported a prior quarter profit of $0.24 a share, topping the suit-and-ties expectations by 8 cents. However, in its previous quarter, GOOS reported a loss of 11 cents a share but still 4 cents ahead of expectations.
Current forecasts have the company earning $0.38 a share on revenue of $198 million. Analyst coverage is minimal with 2 Strong Buys and 3 Buy recommendations. Prior Price Targets from the experts were in the $20’s so another earnings beat could have them tripping over themselves to update them.
However, an earnings miss, or lowered guidance, could take some of the momentum out of the stock.
I’m expecting at least a 10% move in GOOS from current levels that roughly equates to nearly a $4 and would have shares pushing $41 or testing $33. The options on GOOS have been active today so let’s take a look at the possible outcomes.
The GOOS February 39 calls (GOOS180216C00039000, $1.25, up $0.10) and the GOOS February 35 puts (GOOS180216P00034000, $0.90, down $0.05) can be targeting by bullish and bearish traders looking for a directional play.
If shares trade past $41.50 afterwards, or by next Friday and when the aforementioned options expire, the calls would double from current levels with the options being at least $2.50 in-the-money. If shares fall below $33, the puts would return 100% as the options would be worth at least $2.50.
I will be sitting out the fireworks although I’m slightly more bullish than bearish on GOOS. However, earnings trades are very tricky as we have recently experienced, and why I tend to shy away from them.
As far as the market, I expected continued choppiness today and likely into next week, as the market searches for a temporary bottom, or lower lows. Any sharp rebounds will be hard to trust until prior support levels hold for several sessions.
Heading into the second half of action, the Dow is gaining 65 points to 24,978 while the S&P 500 is advancing 16 points to 2,697. The Nasdaq is lower by 37 points to 7,078 and the Russell 2000 is up a point to 1,508.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 5-5 (50%). 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.
Viavi Systems (VIAV, $9.74, down $0.25)
VIAV March 10 calls (VIAV180316C00010000, $0.35, down $0.10)
Entry Price: $0.45 (2/6/2018)
Exit Target: $0.90
Return: -27%
Stop Target: None
Action: Support is at $9.50. Resistance at $10.
Marvell Technology (MRVL, $21.42, down $0.28)
MRVL May 24 calls (MRVL180518C00024000, $0.78, down $0.05)
Entry Price: $0.83 (2/6/2018)
Exit Target: $1.70
Return: -8%
Stop Target: None
Action: Support is at $21.25-$21. Resistance is at $21.75-$22.