In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:
DDS, UTX, RTN, SNDK, WYNN, IYT,
WCG, VAC, PLKI, PLCE, PVH, OXM,
NEW DIRECTIONAL PUT PLAYS
Entergy Corp. - ETR - close: 69.47 change: -1.04
Stop Loss: 72.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.2 million
Entry on June -- at $---.--
Listed on June 25, 2015
Time Frame: Exit PRIOR to earnings on August 4th
New Positions: Yes, see below
Dividend lovers and income investors often consider the utility stocks. Many have hefty dividends that are considered safe and reliable. When the bond market peaked in January this year the utility sector reversed as well.
According to the company, "Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation's leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees."
Earnings have been mixed. Back in February ETR reported its Q4 results where earnings missed estimates but revenues came in better than expected. That switched in the first quarter. ETR reported its Q1 results on April 28th. Earnings soared past expectations but revenues fell -9.0% and came in below estimates.
Most utility stock investors are not looking at earnings so much as they are looking at yields. ETR still has a dividend yield near 4.8%. That's about twice the U.S. 10-year bond yield, which closed at 2.39%. Investors are selling the utility stocks anyway because expectations are growing for the Federal Reserve to raise rates this year or early next year. History shows that the Fed almost never raises just once. It's always a series of rate hikes. This will boost bond yields and make high-dividend stocks less attractive.
ETR's recent oversold bounce just failed near $72.50 last week. Now the stock has reversed and broken down below round-number support at $70.00. The next support level could be $65.00 or it could be $60.00. We are suggesting a trigger to buy puts at $69.25.
I will issue one caveat. The Greece situation is a wildcard. It looks like Greece is headed for a default. If the world reacts poorly to this long-expected event we could see central banks, including the Fed, remain extraordinarily dovish in their monetary policy to reduce any impact of Greece's implosion. This could push the next Fed rate hike farther into the future and might be interpreted as bullish for utilities. I doubt this is a serious threat to our bearish play over the next two months but it could happen.
Trigger @ 69.25
- Suggested Positions -
Buy the AUG $67.50 PUT (ETR150821P67.5) current ask $1.60
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