NEW DIRECTIONAL PUT PLAYS
Lithia Motors Inc. - LAD - close: 68.69 change: -2.08
Stop Loss: 72.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 389 thousand
Entry on October -- at $---.--
Listed on October 22, 2014
Time Frame: We will probably exit prior to earnings on October 30th
New Positions: Yes, see below
Why We Like It:
LAD is in the services sector. The company runs a chain of auto dealerships in the U.S. with 28 brands and almost 100 locations.
The stock soared back in June when it was announced LAD was merging with DCH Auto Group. Yet momentum stalled a few weeks later. Even a better than expected earnings report from LAD in July could not keep the rally going. The stock has been slipping and grew into a bearish trend of lower highs and lower lows.
A few days ago LAD collapsed after the company issued an earnings warning. Management expects 2015 earnings in the $5.60-5.80 range when Wall Street was expecting $6.34 per share. They also lowered guidance for the rest of 2014 as well.
LAD did see an oversold bounce but the bounce has failed at resistance (prior lows). Now the stock is rolling over again. The point & figure chart is suggesting a long-term target near $45.00.
Tonight we are suggesting a trigger to buy puts at $68.25 with a stop loss at $72.25.
NOTE: This could be a short-term trade. Investors may want to exit prior to LAD's earnings report on October 30th.
Trigger @ $68.25
- Suggested Positions -
Buy the NOV $65 PUT (LAD141122P65) current ask $2.30
Option Format: symbol-year-month-day-call-strike