A big move like we had today plays havoc with the charts and inflates option premiums. The three call plays I had on my short list for today were PVH, CNC and AET. All spiked significantly with call premiums soaring. I cannot justify recommending one today because the odds are good we could see a decline just as big as the short squeeze today. The Brexit polls due out tomorrow can push the market just as far as it did today and it could be in either direction.
The failure exactly at resistance at 2,100 on the S&P is very telling. That means there are still sellers waiting to dump stock on any bounce. We need to be careful in adding new positions because of the potential volatility ahead.
NEW DIRECTIONAL CALL PLAYS
ZBRA - Zebra Technology - Company Description
Zebra Technologies designs, manufactures, sells, and supports direct thermal and thermal transfer label printers, radio frequency identification (RFID) printer/encoders, dye sublimation card printers, real-time locating solutions, related accessories, and support software worldwide. Its products are used principally in automatic identification (auto ID), data collection, and personal identification applications. The company also provides mobile computing and advanced data capture technologies and services, which include rugged and enterprise-grade mobile computers; laser, imaging, and radio frequency identification based data capture products; wireless LAN (WLAN) solutions and software; and applications that are associated with these products and services. In addition, it offers barcode scanners; specialty printers for barcode labeling and personal identification; real-time location systems; and related accessories and supplies, such as self-adhesive labels and other consumables, utilities, and application software.
Back on May 10th Zebra was trading at $63 when it reported disappointing earnings. Shares tanked to $48 on the news and the stock has been steadily creeping higher since the bottom on May 19th. The company reported earnings of $1.01 compared to estimates for $1.22. Revenue of $847 million missed estimates for $879 million. They blamed the miss on a cautious enterprise spending environment and tough comparisons from double-digit growth in the year ago quarter. They adopted a "tempered outlook" for full year revenue between $3.56 and $3.7 billion and analysts were expecting $3.72 billion.
Earnings August 9th.
Apparently, investors are willing to forgive and forget and the stock is in rebound mode. Resistance is that $63 level where it was trading before the earnings. That is $6 above today's close so plenty of room for a profitable trade.
Buy August $60 call, currently $2.95. Initial stop loss $54.50.
NEW DIRECTIONAL PUT PLAYS
MYGN - Myriad Genetics - Company Description
This was a recommendation from the weekend but the market bounce caused the stock to gap up over the stop loss at the open. Nobody should have entered the position. Since there was no volume on the put strike it appears nobody did. I am repeating the recommendation today because it rolled over in the afternoon and we can actually get a better entry than we could have without the bounce.
Myriad Genetics is a personalized medicine company, focuses on the development and marketing of predictive, personalized, and prognostic medicine tests worldwide. It discovers and commercializes molecular diagnostic tests that: determine the risk of developing disease, diagnose disease, assess the risk of disease progression, and guide treatment decisions across six medical specialties where molecular diagnostics can enhance patient care and lower healthcare costs.
On June 10th, Crescendo Bioscience, a wholly owned subsidiary of Myriad announced the results of some trials on Vectra DA for patients with rheumatoid arthritis. Apparently the results did not please investors and shares began to collapse. Only a couple days before they announced a $200 million share buyback but that did not help.
When they reported earnings in early May the 41 cents beat estimates for 38 cents. However, they lowered revenue guidance for the full year from $750-$770 million to $753-$755 million. Analysts were expecting $758 million. Earnings guidance was also lowered from $1.63-$1.68 to $1.63-$1.65. Analysts were expecting $1.66. Guidance for the current quarter dropped to 36-38 cents and analysts were expecting 41 cents.
Earnings are August 9th.
Shares crashed on the 10th, consolidated slightly and then began to sell off again. Shares closed at a two-year low on Friday.
With a MYGN trade at $29.85
Buy August $29 put, currently $1.65, initial stop loss $31.85.