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The Hartford Financial Services Group - HIG - close: 36.85
It looks like our patience with HIG might pay off. We've been waiting for the stock to breakout past major resistance near $36.50. The stock has been consolidating sideways beneath this level for months. The plan was to buy calls if HIG can close above $36.75. Shares met that entry point requirement with Thursday's close at $36.85. We want to open positions on Monday morning.
Investors should note that HIG is scheduled to report earnings on July 30th.
Earlier Comments: June 8, 2014:
Financial stocks helped lead the market higher last week. If this bull market continues then the financials should remain part of the leadership group. HIG has been making progress in its transformation. The company is focusing more on its property and casualty insurance business, its Group Benefits business, and its mutual fund business. They just recently sold their Japan annuity company, which has reduced the company's risk profile.
This turnaround has been productive. Their most recent earnings report came in 25 cents better than Wall Street estimates with a profit of $1.18 per share. This net income of $495 million compares to a $241 million loss in Q1 2013. HIG has also been making improvements in its insurance combined ratio, which is essentially their gross margin on their insurance business. They've also been buying back stock.
Technically the three-week bounce from HIG's rising 200-dma has pushed shares toward resistance near $36.50. This is also the top of a five-month consolidation range. A breakout here should signal the next leg higher.
I am suggesting we wait for HIG to close above $36.75 and then buy calls the next morning with a stop loss at $33.75. Our long-term target is the $45.00 region.
We want to buy calls on Monday morning
BUY the 2015 Jan $40 call (HIG150117C40) current ask $0.85
- or -
BUY the 2016 Jan $40 call (FFIV160115C40) current ask $2.97
07/03/14 triggered with a close at $36.85, above our trigger of $36.75
Option Format: symbol-year-month-day-call-strike
Chart of HIG:
Originally listed on the Watch List: 06/08/14