Editors Note:

Shares of Illinois Tool Works have been moving to new highs after beating earnings. Tuesday's dip from a new high may have provided a buying opportunity.



NEW DIRECTIONAL CALL PLAYS

ITW - Illinois Tool Works - Company Profile

Illinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912.

In late July, ITW reported earnings of $1.46 that rose 12.3% and beat estimates for $1.40. Revenue of $3.43 billion beat estimates for $3.40 billion. ITW guided for Q3 earnings of $1.42-$1.52 compared to analyst estimates for $1.46. The company raised full year guidance for earnings by 10 cents to the $5.50-$5.70 range. Analysts were expecting $5.51 per share.

The stock jumped from $111 to $115 on the news and then traded sideways for two weeks on post earnings consolidation. In early August the shares started a slow climb to hit $119 and a new high. Every day I thought about recommending ITW but I kept waiting for a pullback. We saw a minor decline on Tuesday to $118 and a positive gain on Wednesday. This may be our chance to buy a dip, even as small as it was.

Earnings Oct 19th.

With an ITW trade at $119.25

Buy Dec $125 call, currently $2.00. No initial stop loss.

If you want to buy the $120 strike you could turn it into a spread by buying the Dec $120 and selling the Dec $130. The net debit today would be $3.40. I still think that is expensive and why I recommended the $125 call.


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays