The bulls have gotten off to a slow start and are trying to push the market higher despite the lack of positive headlines. China said inflation was up and consumer spending was down and Monday’s have been weak in recent weeks so a flat to up close would be a good day. Wall Street is pondering the next catalysts that could move the market higher while looking out for the potholes that could cause a pullback that has caused the pause.
We are still bullish and believe the Financial stocks will need to continue to breakout to get the next leg higher going and a continued rebound in Tech would be helpful. We would also like to see companies start to raise guidance as we wind down 1Q earnings and get ready for 2Q numbers that will begin to flow the first week of April. Oh, and we would like to see the zombies come together without raising taxes. It’s a big wish list but one that is doable.
One stock we are watching after the close today is Scientific Games (SGMS, $8.89, up $0.01) that could be in for a big move. We are on the sidelines with playing an earnings trade but we are bullish on shares long-term. The company is expected to earn 5 cents a share but we think they could do a penny or two better. However, its recent acquisition of WMS Industries was a big pill to swallow and they could take some accounting charges.
The March 10 calls (SGMS130316C00010000, $0.15, flat) and the March 7.50 puts (SGMS130316P00007500, $0.10, flat) could be used as a strangle option trade but these premiums are a little pricey and shares would need to move past $10.25 or $7.25 tfor the trade to break even. Of course, there could be a trade if you went with a directional trade but these options expire Friday so this would also be a risky strategy.
Perhaps the best way to play this earnings announcement is to buy or short the stock. If the company announces better than expected numbers and mentions the synergies are working with its recent marriage, shares could make a run past $10. If there is a drain on earnings and a miss, expect the stock to take a hit.
As far as the market, the Dow up 15 points to 14,412 while the S&P 500 is higher by a point to 1,551. The Nasdaq is lower by 2 points to 3,242.
We do have 2 NEW TRADES that are not an earnings play but ones on fundamentals and chart work. We also have some nice pin action on a few of our other trades so let’s go see where things are at. Subscribers, check the Members Area for the updates and use limit orders to get the best fills. We will be back in the morning with a full report.