NEW DIRECTIONAL PUT PLAYS
Rackspace Hosting - RAX - close: 32.29 change: -0.53
Stop Loss: 33.25
Target(s): to be determined
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings in early May
New Positions: Yes, see below
Why We Like It:
RAX is in the technology sector. The company provides cloud computing services and web hosting. Unfortunately for RAX the company is getting beaten up by major competition. Not only does it have to compete with the likes of Amazon.com (AMZN), Google (GOOG), and Microsoft (MSFT) but all three have recently announced price cuts to some of their cloud computing services and storage. That's going to make it tough for RAX to grow or even keep the cloud computing business it does have. Wall Street has obviously noticed RAX's predicament and the stock has been trending lower.
Shares did not participate in the market's rally today but instead reversed with a -1.6% decline. We're suggesting a trigger to buy puts at $31.90 with a stop at $33.25. There is a chance that the $30.00 level could be round-number support but we're aiming lower. We're not setting a firm exit target yet but the Point & Figure chart for RAX is bearish with a $21 target.
Trigger @ 31.90
- Suggested Positions -
Buy the MAY $30 PUT (RAX1417Q30) current ask $1.50
Entry on April -- at $---.--
Average Daily Volume = 2.2 million
Listed on April 01, 2014