Sunday, December 14, 2008

Earnings Week of 12/15

The set up is the same described in last week’s post with the same caveats in place. Perhaps with the added reminder that this is op-ex week and that the wrong side of any strangle will likely be immediately worthless as the IV collapses.

Spreadsheet Link

Monday – No releases made it through the filter. Just as well, since it’s too late to set up for them anyway.

Tuesday – ADBE, BBY, & GS. I’ll say this about GS: anyone who still believes in the reporting of the big financials at this point is a liar or a naïf. Many others have made this point far better than me, but earnings releases for these guys are basically theater of the absurd. That leaves ADBE, which rarely moves more than 5% on earnings and BBY which behaves similarly. BBY had interested me as a short possibility as it was making its climb to the 50 DMA. Gut reaction is to listen closely to what they have to say and watch for a move afterwards. Positive news could boost them to the 29 area, and a very cloudy or negative read on early holiday shopping would cause a failure at the 50 DMA and a fall to the 20 area over several sessions.

Wednesday – See above on GS for MS. CAG, GIS, and PAYX rarely move much. NKE is intriguing but the options pricing is very reflective of the chart and has a break-even low price of 42.50, which would be just below the recent lows. Another one to probably avoid unless you feel like gambling with naked puts on op-ex week. JOYG has in the past been a profitable earnings play, though as I recall that was due to some fortuitous entries. Anyhow, last quarter they dropped 20% dropping below the 30 DMA from which JOYG has peeked above just once since. The break-even high at 24.88 leaves little room for error with the 50 DMA just above that at 24.98. Another one with no clear reason to play on op-ex week.

Thursday – A hodge-podge of releases… FDX already threw out some guidance and was downgraded. The big one here is RIMM. Considering how far they’ve fallen, and the apparent bottom that has been put in, I am cautiously optimistic that the 9.38% move to the upside required for a strangle to break-even could be hit without too much difficulty. Similarly, if RIMM fails at this level there is no support for it until the 30 area and for that level you have to break out the long term chart and check out late 2006. This one is attractive to play as a strangle, even with the warning that these contracts will be worthless if the shares do not make the appropriate move.

Friday – DRI jumped almost 10% on Friday on news or rumor that I apparently missed and can find no news story about. DRI gapped down and then significant buying volume pushed it back up almost immediately before dropping off. It’s hard to know what to make of this, but the Friday bullish engulfing candle sure is impressive and the daily chart is certainly positive. DRI has been only moderately volatile historically and in this market environment, to put so much work into a play seems like a waste of time.