Explosive Stock and Option move in FOLD Coming/ 50% Discounts from NextOptions.com
Dear Trader -
We wanted to give you a quick update on a stock and explosive option trade we currently have our subscribers in.
Amicus Therapeutics (FOLD, $9.25, up $0.46) surged another 7.3% Friday as you can see from the chart below with the November 2016 and 52-week high of $9.61 within shouting distance. We have also included some Talking Points/ Technical Analysis.
Here is a peak at Monday morning's action on the option trade that is up 80% in the blink of your eyeballs...
Amicus Therapeutics (FOLD, $9.43, up $0.64)
FOLD July 9 calls (FOLD170721C00009000, $0.90, up $0.35)
Entry Price: $0.50 (6/15/2017)
Exit Target: $1.00-$1.50
Stop Target: 55 cents (Stop Limit)
Action: SIGN-UP by Monday morning's opening bell to get our latest comments.
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Shares of Kroger (KR) could be on the verge of a major move in after-hours trading as the company announces 1Q earnings. Wall Street is expecting a profit of $0.58 a share on revenue of $35.77 billion. The high estimate has earnings at $0.61 a share while the low estimate is at $0.55 a share. This could mean a headline beat or miss of up to 3 cents.
Over the past four quarters, Kroger has topped estimates in three of them by a penny twice and two cents. The other quarter was a match. As far as revenues, they have come in higher the past two quarters following two previous quarters that missed expectations.
The chart below shows shares are currently holding support at $30 and the 50-day moving averages with near-term resistance at $30.50 and the 100-day moving average. Additional hurdles are at $31-$31.25 and the 200-day moving average.
It's no secret that competition in the grocery space has heated up with a couple of overseas companies coming to American shores. Aldi recently announced plans to invest $3.4 billion to increase its U.S. store presence to 2,500, up from a current 1,600, by 2022. Meanwhile, German rival Lidl plans to open 100 stores in the country this month.
The number of U.S. companies competing with Kroger continues to grow with new competition coming from Blue Apron which filed to go public this month under the ticker symbol APRN. Amazon is also pursuing an aggressive grocery delivery strategy that may or may not work, and intends to take customers from rival chains.
Despite the growing competition, we're guessing Kroger tops estimates on both the top and bottom line. If revenues clear $36 billion for the recently ended quarter, along with a penny or two earnings beat, shares could see a pop of 5%-10%. If Kroger comes in light with numbers while lowering guidance, shares could move 5%-10% lower.
As far as a possible option trade, the KR July 31 calls (KR170721C00031000, $0.75, down $0.05) can be used by bullish traders expecting a run towards $32-$33. These call options would double from current levels, technically, if shares trade past $32.50 by July 21st.
Bearish traders can target the KR July 30 puts (KR170721P00030000, $1.00, up $0.10) for a possible backtest to $29-$28 on disappointing results. These put options would double from current levels, technically, if shares fall below $28 by July 21st.
There are also June options available to trade that expire this Friday. The KR June 31 calls (KR170616C00031000, $0.40, down $0.05) could be a gambler's delight and would double from current levels if shares trade past $31.80 by Friday's close.
We would prefer the July 31 calls over the June 31 calls as they have 5 more weeks of time premium. We do believe Kroger is one of the stronger companies in the sector but there are risks.
Turning our focus on the indexes, the bulls are pursuing higher highs ahead of today's decision on interest rates. The Dow is up 8 points to 21,337 while the S&P 500 is down 2 points to 2,438. The Nasdaq is higher by 9 points to 6,229 and the Russell 2000 is declining 7 points to 1,418.
With second-quarter earnings season just a month away, earnings have been on the back-burner as Wall Street focuses on economic and geopolitical news in the meantime. Companies with different fiscal years fill the void during off months following the the rush at the start of the quarterly earnings announcements.
Ambarella (AMBA) will confess first-quarter results after today's closing bell with Wall Street looking for a profit of $0.36 a share on revenue of $63.5 million. The company has smashed estimates the past four quarters by 18, 17, 16, and 6 cents, respectively. The high estimate for the recently ended quarter has the company earning 41 cents a share.
Despite the impressive earnings beats, shares have struggled afterwards falling the past three earnings announcements. The pullbacks have been 4%, 11%, and nearly 7%. In the year ago period, shares rallied 9%.
Last week's sudden pullback from the $65 level to double-nickels ($55) came on drone launch concerns as the company's largest customer, DJI, may have dual-sourced video processing chips. DJI's Spark drone went on the market with a price tag of $499 and this concern could become a material headwind, if true.
Shares held the 100-day moving average on the punishment and are trying to hold shaky support at $59 and the 200-day moving average heading into the announcement. The 50-day moving average was in a solid uptrend but leveled off following the technical damage.
The recent action has juiced the option premiums in AMBA with weekly and monthly strikes available to trade. The regular AMBA June 60 calls (AMBA170616C00060000, $2.40, up $0.20) and the AMBA June 60 puts (AMBA170616P, $3.05, down $0.15) are pricing in a possible 8%-10% move in the stock during after-hours and into tomorrow's open.
I don't actively follow AMBA and I'm not sure if the recent volatility is an overreaction, or represents a buying opportunity ahead of earnings.
If shares were to make a run to $65 this week, the aforementioned call options would double from current levels as they would be $5 "in-the-money". If shares stay below $60 and falter on the news, the call options would expire worthless. If shares fell below $53.90, technically, by next Friday, the aforementioned put options would double from current levels.
I don't usually trade options that are priced over $2, especially with earnings trades, so I will be sitting on the sidelines watching the action. Other stocks in the chip sector could react in a positive or negative way based on AMBA's numbers and I'm looking to the possible upside in other names.
Today's action has been more of the same as yesterday with tight action to the downside. The market seems content to wait for the Thursday's fireworks showcasing a former head of the FBI's comments following his firing from a month ago and the outcome from the overseas election.
The Dow is down 5 points to 21,178 while the S&P 500 is off 2 points to 2,434. The Nasdaq is slipping a point to 6,294 and the Russell 2000 is declining 6 points to 1,390.
I have updated our current trades so let's go check the tape.