by Ian Harvey
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Wednesday, May 02, 2018
1. Domtar Corp (USA) (NYSE: UFS) Calls – Starting to pick up steam!
2. Option Trade - - Snap Inc. (NYSE:SNAP) PUTS – been as high as $3.07.
Sell now at about $2.50 if you haven’t already done so.
Option Trade - - Wendys Co (NASDAQ: WEN) CALLS
Wednesday, May 02, 2018
** OPTION TRADE: Buy WEN JUNE 15 2018 17.000 CALL at approximately $0.50 each.
Wendys Co (NASDAQ: WEN), a restaurant company specializing in the hamburger sandwich segment, is likely to breakout quite soon. The stock is forming an ascending triangle.
An ascending triangle is easy to spot. This chart pattern forms when a stock is failing to break out higher and hitting a resistance level, which is shown in red on the chart for Wendy's below, at roughly the same price. However, on the pullbacks, the stock is turning higher at a higher price point than before, creating the green support line on the chart.
Any day now, the stock is going to break out higher, which is usually the case with ascending triangles, and particularly when the trendlines are close together.
Factors Affecting the Stock ……
The pivotal moment may be in the fast food company's
quarterly earnings report that is set to be announced after the market closes
on Tuesday, May 8th.
Wall Street analysts expect Wendy’s to report
earnings per share of $0.10 for the current fiscal quarter. Six analysts have
issued estimates for Wendy’s’ earnings, with the highest EPS estimate coming in
at $0.11 and the lowest estimate coming in at $0.09. Wendy’s reported earnings
of $0.09 per share in the same quarter last year, which indicates a positive
year-over-year growth rate of 11.1%. The business is expected to announce its
next earnings results after the market closes on Tuesday, May 8th.
Also, equities research analysts expect that Wendy’s
will post $379.98 million in sales for the current. Six analysts have provided
estimates for Wendy’s’ earnings, with the lowest sales estimate coming in at
$373.41 million and the highest estimate coming in at $384.38 million. Wendy’s
reported sales of $285.82 million in the same quarter last year, which
indicates a positive year-over-year growth rate of 32.9%.
Earnings could easily push the stock beyond the
resistance level on the chart. If that is the case, we are looking at more than
20% in upside potential from that point.
Ascending triangles give an easy-to-define price target. All you do is take the height of the pattern, from the lowest price to highest, and add it to the red resistance line. In this case, that is $3.95, and it brings the price target to $21.70 – 22.85% above the resistance line.
A number of research firms recently weighed in on WEN……
The bottom line is that Wendy's stock is on the verge of a breakout, and it could begin as soon as next week with its earnings report. The stock is poised to make a big move, and if that is to the upside, Wendy's has a 20% gain ahead of it.
Option Trade - - Snap Inc. (NYSE:SNAP) PUTS
Monday, April 30, 2018
** OPTION TRADE: Buy SNAP MAY 18 2018 14.000 PUT at approximately $1.00 each.
This price will need to be adjusted once the market opens especially if the stock price climbs – try to buy when it peaks!
Snap Inc. (NYSE:SNAP), formerly Snapchat, Inc., a camera company, has continued to disappoint investors. Snap is confirmed to report earnings tomorrow, Tuesday, May 1, 2018, after the market closes.
For the first quarter of 2018, the Consensus Estimate for Snap's total revenues is pegged at $247 million, indicating an increase of 64.7% from the year-ago period. However, the projected increase is lower than the growth rate witnessed in the last reported quarter.
The Consensus Estimate for loss per share stands at 17 cents, narrower than a loss of 20 cents reported in the year-ago quarter but wider than a loss of 13 cents in fourth quarter.
Last report saw the company surprise investors with a strong fourth-quarter performance, beating expectations for revenue, earnings, and user growth. Shares spiked following the report, but the stock has given up those gains in the months since after several high-profile user complaints about the redesign and an offensive advertisement.
Overall earnings estimates have been revised lower since the company's last earnings release.
Option traders are pricing in a 15.5% move on earnings and the stock has averaged a 24.4% move in recent quarters.Factors Affecting the Stock ……
Although the growing popularity of Snap's messaging
application among teenagers is a positive, the quarter witnessed investors'
anxiety over a number of reasons, with redesign taking center stage. The
redesign of the Snapchat app has garnered significant negative response and
there has been growing tension among investors as to whether it would have an
adverse impact on the company's ad business.
This is mainly due to the fact that Snap operates in
an environment where competition for ad revenues is highly intense. Advertisers
are more likely to opt for other platforms such as Alphabet GOOGL, Facebook FB
and Twitter TWTR as the total addressable market (TAM) of these companies is
much bigger than Snapchat.
As well, Snapchat is losing market share to
Facebook-owned Instagram, which put up a superb show this quarter. Per Sensor
Tower, Instagram downloads continue to surpass Snapchat in the global market,
with the gap growing in the first quarter.
Also, Snap's outstanding result in the last quarter
was due to robust ad spending by large brands during the holiday season, which
is however expected to remain muted this season. Per a latest survey by
Digiday, 42% of the respondents said that Snapchat was the most difficult
platform for digital advertisements. Therefore, Snap with its limited reach is
likely to bear the brunt.
Snap seems to be more focused on improving
profitability, which is evident from the back to back layoff of workers. But
further cost cutting without any significant rise in the top line may not be
enough to boost profitability.
Wedbush analyst Michael Pachter has this to say about SNAP, “Decelerating growth trends, fierce competition for user mindshare and advertiser dollars, and a history of being hugely unprofitable keep us on the sidelines.”
Overall, the analyst holds tight to his neutral stance on Snap ahead of the print, even with optimism in the mix: “Despite improvements in programmatic, we believe that Snapchat remains one of the most difficult-to-use social platforms for advertisers, and we anticipate modest user growth given its already high penetration among 13 – 34 year olds and high data loads. Notwithstanding the potential for sustained revenue growth above 30%, we continue to expect negative operating margins for the foreseeable future.”
Anticipate the rate of growth to decline,
continuing the trend of the first three quarters of 2017.
UPDATE – Monday, April 30, 2018
It appears that we may have a positive start to the week according to the futures – last week was quite difficult.
1. Walt Disney Co (NYSE:DIS) Calls – we should start to see this pick up after the success of the movie “Avengers” over the weekend.
If you haven’t already executed this trade do so now if possible – about $0.60.
2. Domtar Corp (USA) (NYSE: UFS) Calls – I recommended that you buy the same amount of contracts again now that the price has dropped – aim for $0.50. This will have reduced the cost to approximately $0.75.
Set the sell value at $1.50.
If you have not already executed the trade buy now at about $0.40.
Sell at $1.00.
3. Micron Technology, Inc. (NASDAQ:MU) Calls – a bit of a disaster – let’s see what pans out today!