Netflix and Cree Earnings Ideas

• Posted by Greg Harmon
• on January 20th, 2015

The ideas below were given to premium users at noon for earnings tonight. Can still join at $618 with a free signed copy of my book through midnight here:

Two names today, that report after the close tonight, Cree, $CREE, and Netflix, $NFLX.

Cree, $CREE

Cree, $CREE, made a double top in 2013 and spent most of 2014 falling. in the last quarter though it has started to base. Since December it has formed a descending triangle with a a base at 29.20 and tightening against resistance. The RSI is running sideways without a signal along with the MACD. There is support lower at 27.30. There is resistance higher at 32.60 and 34.10 followed by 36.70 and a gap to fill to 39.45. The reaction to the last 6 earnings reports has been a move of about 14.17% on average or $4.40 making for an expected range of 26.60 to 35.40. The at-the money weekly January Straddles suggest a smaller $3.10 move by Expiry with Implied Volatility at 123% above the February at 55%. Short interest is high at 18%. Open interest favors the 33.5 Strike with a range of 29 to 30 on a disappointment move lower.

Trade Idea 1: Buy the January 23 Expiry 32/33.5 1×2 Call Spread for free.

Trade Idea 2: Buy the January 23 Expiry 32/33.5/35 Call Butterfly for $0.30.

Trade Idea 3: Buy the January 23/February 33 Call Calendar for $0.50.

Trade Idea 4: Buy the January 9 Expiry 30/28.5 1×2 Put Spread for free.

#1, #2 and #3 are straight directional upside looking for a reversal. #1 uses margin and #3 is for longer term. #4 uses margin and covers the downside. I prefer #1 or #2 together with #4 , or #3.

Netflix, $NFLX

Netflix, $NFLX, was at all-time highs in the summer and has pulled back since. Most of that happened when they last reported. Since the gap down it has consolidated against the support level of 314 lately and is again pressing on falling trend resistance. The RSI is rising and making a 3 month high into earnings with a MACD crossed up, signalling higher. There is support lower at 314 followed by 300 and 283 before 267 and 241. There is resistance higher at 350 and 377 before 392 and 420. The reaction to the last 6 earnings reports has been a move of about 10.18% on average or $34.50 making for an expected range of 303 to 375. The at-the money weekly January Straddles suggest a similar $36 move by Expiry with Implied Volatility at 137% above the February at 54%. Short interest is elevated at 8.6%. Open interest favors the 345 Strike this week.

Trade Idea 1: Buy the January 23 Expiry 320/300 Put Spread for $5.80.

Trade Idea 2: Buy the January 23 Expiry 320/300/280 Put Butterfly for $2.50.

Trade Idea 3: Buy the January 23 Expiry 340/350 Call Spread for $5.

Trade Idea 4: Buy the January 23 Expiry 340/350 Call Spread and sell the 300 Put for free.

Trade Idea 5: Buy the February 340/350 Call Spread and sell the January 23 Expiry/February 300 Put Calendar for $2.

#1 and #2 are downside trades with #2 a slightly better risk reward , but relying on a stop at 300 where there is also large Open Interest. #3 is simple to the upside and #4 adds leverage. #5 gives it more time and protects the downside this week. I like #2 for the downside and #5 for the upside.

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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.

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