Shares of Nike (NKE, $76.84, down $2.43) are falling 3% today following a mixed earnings report after Thursday’s close. The company has been a Wall Street darling (and one of our favorite option trades) over the years and usually spanks the suit-and-ties estimates.
In recent quarters, Nike has topped forecasts by a penny, 8, 2, and 6 cents over the past 4 quarters, respectively. Over the years, we have taken bullish call option trades on Nike but have stayed on the sidelines in recent quarters as the “pops” after the announcements have become less and less and are starting to turn negative.
Shares slipped nearly $1 in December on their last earnings announcement. The stock was flat in September’s update in the following trading session and in June 2013, shares were up $1.36. The previous March, shares surged $6 from $53 to $59.
In other words, the trade has been crowded of late.
There was nothing wrong with Nike’s numbers as the company reported earnings of 76 cents a share on revenue of $7 billion. Analysts were looking for 72 cents/ $6.7 billion. The numbers were impressive, especially the revenue beat, but the stock is getting punished after the company said recent currency wars would likely impact current quarter numbers and might be a drag for several quarters.
Nike does business in a number of world currencies and although the Dollar is used in roughly 2/3rd’s of their transactions, the other 1/3 is not. This creates risk and a possible headwind for shares to gain momentum going forward.
There will be a time to play Nike again, maybe as soon as next week if support holds. However, we will have to do some chart work over the weekend to see if there is an option trade for a rebound back to $80, or a continued drop towards $75-$73.
We mentioned this morning today would be a busy day for us as we have a number of trades clearing the books. There were a few put option trades we took in early February for “protection” but we have learned our lesson over the years not to go overboard with options against a strong trend.
We have continued to call for new all-time highs into 2014 and while the road has been choppy, the bulls have kept the bears in hibernation for the first three months of the year.
Remember, we were probably the only option newsletter that accurately called the Dow’s 3,000 point gain last year and we went on record again this past February saying there could be another 3,000 point gain this year for the blue-chips. Yes, Dow 19,000 – if the long-term uptrend lines hold . If not, Dow 13,000 could also be a possibility.
At current levels, this means there will plenty of room to play a continued bull run all year long, or at some point, the mother of all selloffs.
We do our weekend homework on Sunday evenings into Monday morning and its this type of forecast that keeps us motivated. Then again, in 6-years, we have never had a losing Track Record so we are always motivated to make you (and us) some money!
Out 7th year could be our best as we are ending the quarter with some jaw-dropping gains. April and 1Q earnings season are just around the corner and with March Madness just starting, the next 6 weeks could provide a bevy of trading opportunities.
Our portfolio will be light as a feather and we will have plenty of room to add New Trades to take advantage of a continued breakout or a possible breakdown from current levels. In fact, we have a New Trade today for our Daily and we might also have a new recommendation for our Weekly Wrap as well.
As we make the turn, the Dow is up 113 points to 16,444 while the S&P 500 is higher by 10 points to 1,882. The Nasdaq is gaining a point to 4,320 and Russell 2000 is chugging a 6-pack to 1,205.
Subscribers, hit the Members Area for the updates and stay near your email inboxes into the close in case we have additional Trade Alerts.
We will update our first quarter Track Records for the Weekly Wrap on Sunday night and for the Daily on Monday morning that we will send with the newsletters like we do every week. Until then, have a great weekend everyone!
Tags: daily option picks, day trading weekly options, option picking service, selling climax, support and resistance trading, trading support and resistance, weekly options windfall, weekly stock options