Premium Earnings 7-11-12, Marriott and Infosys
- Posted by Greg Harmon
- on July 11th, 2012
Marriott International, $MAR
Marriott International, $MAR, has been trading in a channel for 4 months between 36.35 and 40.20. The Relative Strength Index (RSI) has become neutral over that time and is pulling back after, with a Moving Average Convergence Divergence (MACD) indicator that is positive but about to cross negative. This has a neutral bias. There is resistance higher at 39.10 and 40.20 with a Measured Move to 44 above. Support lower is found at 37.55 and 36.90 followed by 36.35 and 35.90 before 35.20 and 34. The reaction to the last 6 earnings reports has been a move of about 2.7% on average or $1.03 making for an expected range of 37.75 to 39.80. The at-the money July Straddles suggest a $1.90 move by Expiry with Implied Volatility in the front month elevated at 41% against the historical at 29% and August at 32%.
Trade Idea 1: Sell the July 38 Straddle for $2.00.
Trade Idea 2: Sell the July 35/38/38/41 Iron Condor for $1.55.
Trade Idea 3: Sell the July/August 40/41 Call Diagonal Calendar for 25 cents.
Selling the July 40 Call and buying the August 41
Trade Idea 4: Sell the July/August 36/35 Put Diagonal Calendar for 35 cents.
Selling the July 36 Put and buying the August 35
I like #2 the best
Infosys Technologies, $INFY
Infosys Technologies, $INFY, is building a base and maybe trying to move higher after a fall from the 55 level last earnings. The RSI is pulling back after moving into bullish territory, with a MACD that is positive but fading. This has a neutral bias as well. The weekly view is verging on a move up but building a bear flag and the 3 box reversal Point and Figure chart has a price objective of 25, below the bear flag target on a downside break at 31. There is resistance higher at 45.50 and 46 followed by 47.50 and 49. Support lower is found at 42 and 38.75 followed by 36.80 and 33.35. The reaction to the last 6 earnings reports has been a move of about 9.25% on average or $4.10 making for an expected range of 40.10 to 48.30. The at-the money July Straddles suggest a move of only $3.65 move by Expiry with Implied Volatility in the front month elevated at 66% against the historical at 29% and August at 43%.
Trade Idea 1: Buy the July 42.5/45 Strangle for $2.65.
Looking for a bigger move based on history
Trade Idea 2: Buy the August 40/35 Put Spread for $0.75.
Following the longer view lower from the PnF
Trade Idea 3: Buy the July/August 40 Put Calendar for 55 cents.
Trade Idea 4: Sell the July/August 47.5 Call Calendar for 20 cent credit.
A winner on a big move higher early that fades
I like #3 or #4 for a longer trade, or both.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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