Fastenal Earnings Trade

Fastenal, $FAST, reports earnings in the morning before the open. It fell hard from a top at 54.86 in late March and has been roughly basing between the 50% and 61.8% Fibonacci retracements of the prior up move, between 38.77 and 41.84, for the past 5 weeks. A break of this base lower carries a Measured Move first to 36 and ultimately to 26. The Relative Strength Index (RSI) remains bearish after trying to move higher, and is now pulling back, with a Moving Average Convergence

Fastenal, $FAST

Divergence (MACD) indicator that is positive but trending lower. This has a downside bias on the daily chart although a move over 42 could change that. Support lower is found at 38.75 and 37.75 followed by 36.35 and 35.50 before 33.80 and 32.85. There is resistance higher at 41.50 and 42 followed by 43.12 and 45.75. The reaction to the last 6 earnings reports has been a move of about 2.9% on average or $1.15 making for an expected range of 38.50 to 40.80. The at-the money July Straddles suggest a $2.60 move by Expiry with Implied Volatility in the front month elevated at 55% against the historical at 30% and August at 40%. There is large activity in the July 40 Put today with 3,940 trading against open interest of 10,000, mainly on the buy side.

Trade Idea 1: Buy the July 40 Put for $1.60.

Trade Idea 2: Buy the July 40/35 Put Spread for $1.40.

Trade Idea 2: Buy the July/August 35 Put Calendar for 40 cents.

I took trade #3 for a 35c fill

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