NEW DIRECTIONAL CALL PLAYS
Dycom Industries - DY - close: 71.04 change: +0.02
Stop Loss: 68.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 729 thousand
Entry on January -- at $---.--
Listed on January 12, 2016
Time Frame: Exit PRIOR to earnings in late February
New Positions: Yes, see below
Shares of DY suffered a -20% correction in the last several weeks of 2015. In spite of the pullback DY was one of the market's best performing stocks last year with a +100% gain. The reason why DY performed so well is rising demand for its telecom infrastructure business.
Think about your smartphone usage. Consumer demand for data and streaming video has surged and will only increase as we go forward. That has the major communications companies upgrading their networks to handle more data and that means more business for DY.
DY is part of the industrial goods sector. According to the company,
"Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include project management, engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities, including telecommunications providers, and other construction and maintenance services to electric and gas utilities."
Stocks are supposed to rise when the company delivers earnings growth. Last year DY did not disappoint. In 2015 DY saw its revenues grow +20% while earnings surged +150% for the year. Their most recent earnings report was November 23rd. DY delivered their 2016 Q1 results. Quarterly earnings soared +110% from a year ago to $1.24 a share. Analysts were only expecting $1.01 on revenues of $625 million. DY said revenues were up +29% to $659 million. Furthermore DY's management raised their Q2 guidance significantly above Wall Street estimates. For the year ahead analysts are forecasting DY's earnings to rise +62% in 2016.
Technically DY's stock has been correcting lower. The point & figure chart is bearish but a rise above $75.00 will generate a new buy signal. You can see on the daily chart that DY bounced off technical support at its 200-dma but remains inside its descending bearish channel. We want to be ready to catch the breakout if DY does break out of this channel. Tonight we are suggesting a trigger to buy calls at $73.75. I'm listing the March $75 calls. You may want to consider the March $80s instead.
Trigger @ $73.75
- Suggested Positions -
Buy the MAR $75 CALL (DY160318C75) current ask $4.60
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike