MomentumOptions.com Mid-Market for 2/14/2018
Energous (WATT) Poised for Big Move
3:35pm (EST)
One of my favorite stories and a stock I have covered and traded over the past few years is Energous (WATT). The company will announce earnings after Thursday’s closing bell with a double-digit percentage move in the stock highly likely.
Analysts have the Energous posting a loss of 58 cents a share on revenue of $350,000. Over the past four quarters, the company has posted a loss, but more importantly, the losses have been much wider than expected at 3,4, 1 and 21 cents, respectively.
Revenues have also been substantially below estimates, as well, and another not so good sign you want to see from a company with a hot technology. In late December, the FCC (Federal Communications Commission) certified the company’s WattUp Mid Field transmitter, making it the first time ever the FCC has approved a charger capable of transferring power wirelessly up to 3 feet over RF frequencies.
To dummy things down, it means your smart device would “always be charging” if it is near the transmitter. This is certainly breakthrough technology and would the remove the requirement of having a cord connected, or a charging station that that you device needs to rest on, to juice up. Of course, 3 feet isn’t a lot of space and is and should be a major concern with the technology at the current moment.
The guidelines will be starting to come into place for new WattUp technologies with more power, functionality, and scale. This should be a big focus on the company’s conference call along with potential new partnerships.
Shares zoomed on the FCC on the news and traded from a closing price of $8.84 ahead of the December news to $33.50 over a 2-day span afterwards. The chart shows the volatility afterwards as analysts, and other research firms, battle over price targets along with the fundamentals and outlook. Current resistance is at $20-$20.50 with a move above the latter ahead of the news being a possible bullish signal for a surge past $22-$24, or higher. Support is at $19.50-$19…
One brokerage firm came out with a raised Price Target from $22.80 to $45.80. Another research firm called out the company’s history of deception with a price target of $15 after the FCC story broke.
Another concern that has been overlooked is the company pre-warned in late January Q4 revenue would come in at $300,000 and below the forecast of $350,000 mentioned earlier. Additionally, the company sees GAAP operating expenses between $11.2-$11.5 million, and depreciation and amortization expenses of approximately $300,000.
For a surge into the mid-$20’s, these numbers would certainly have to come in better, or the full-year forecast has to be a dozy and well above expectations. If these numbers are worse, and the company offers a lowered outlook, shares could easily backpedal into the mid to low teens.
The WATT February 17.50 puts (WATT180216P00017500, $0.25, down $0.10) and the February 22.50 calls (WATT180216C00022500, $0.35, up $0.10) could be considered as “lottery trades” to play a surge past $23, or a drop below $17 for traders looking at a strangle option trades with profit potential.
As directional trades, without protection, the stock would need to clear $22.85 to break even on the call options with a move past $23.20 returning a profit of 100% at current levels. If shares fall below $17.25 the put options would at least break even with a drop below $17 getting a triple-digit return.
The risk is that shares stay between these levels into Friday’s closing bell as these options would expire worthless. The risk could be lowered by using March or other monthly and yearly LEAP options that are available but the premiums are more expensive and different calculations would need to be made.
As far as the market, the bulls are showing strong gains as we head into the closing bell. 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.
Intel (INTC, $45.41, up $0.95)
INTC April 46 calls (INTC180420C00046000, $1.74, up $0.37)
Entry Price: $1.28 (2/14/2018)
Exit Target: $2.60
Return: 22%
Stop Target: None
Action: Resistance is at $45.50. Rising support is at $45.
Viavi Systems (VIAV, $9.67, down $0.05)
VIAV March 10 calls (VIAV180316C00010000, $0.30, flat)
Entry Price: $0.45 (2/6/2018)
Exit Target: $0.90
Return: -33%
Stop Target: None
Action: Support is at $9.50. Resistance is at $9.75-$10.
Marvell Technology (MRVL, $22.35, up $0.03)
MRVL May 24 calls (MRVL180518C00024000, $1.00, flat)
Entry Price: $0.83 (2/6/2018)
Exit Target: $1.70
Return: 20%
Stop Target: 85 cents (Stop Limit)
Action: Resistance is at $22.50-$22.75. Support is at $22.25-$22.