NEW DIRECTIONAL PUT PLAYS
Eagle Materials - EXP - close: 70.20 change: -1.12
Stop Loss: 73.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 933 thousand
Entry on January -- at $---.--
Listed on January 1509, 2015
Time Frame: Exit PRIOR to earnings on Feb. 3rd
New Positions: Yes, see below
Why We Like It:
EXP is in the industrial goods sector. The company describes itself as, "Eagle Materials Inc. manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard, Concrete and Aggregates, and Oil and Gas Proppants from 40 facilities across the US."
The crashing price of oil could have consequences for EXP. Energy companies will cut spending that includes cutting jobs. As they cut jobs, demand for housing will fall. That will hurt the builders and demand for wallboard will go down.
Major U.S. homebuilders are already sounding the alarm with executives at both Lennar (LEN) and KB Home (KBH) warning about margins this week.
Another challenge for EXP will be their proppants business. As energy companies drill fewer wells there will be less demand for proppants.
Earnings were already struggling last year with EXP missing Wall Street's estimates three out of the last four reports. The one report they beat estimates they only beat by a penny and missed revenues at the same time.
Technically EXP has broken down into a bear market. The point & figure chart is bearish and forecasting at $63 target.
Currently EXP is poised to break support near $70.00. The January 14th low was $69.57. We are suggesting a trigger to buy puts at $69.45. Plan on exiting prior to EXP's earnings report in February.
Trigger @ $69.45
- Suggested Positions -
Buy the Feb $65 PUT (EXP150220P65) current ask $2.05
Option Format: symbol-year-month-day-call-strike