Linking Technicals and Options For an Earnings Trade in LinkedIn

• Posted by Greg Harmon
• on October 29th, 2015

LinkedIn, that social website for business where everyone you ever knew who is looking for a job asks to connect with you and then you never hear from them again. Oh, that is until the site teases you with either a work anniversary or endorsement. I am not sure what people actually use this site for but I am on board and keep it up to date.

They apparently make some money too. The company reports earnings after the close tonight. The crowd over at Estimize is looking for a 49 cent EPS number, higher than Wall Street analysts at 47 cents and $758 million in revenue. I am more interested in the forensic data in the market place.

The chart shows a gap down after the April report that then drifted higher until the July report and another gap down. This one made a lower low, but then consolidated in a symmetrical triangle. It broke that triangle to the upside last week and carries a target to 240 on the breakout. That is into the gap from April.

The momentum indicators have moved to being very bullish. The RSI is rising in the bullish zone with the MACD moving up as well. The Bollinger Bands® are also opening to allow a move higher.

There is resistance at about 220 above and then 230 before getting into that gap with 245 and then 251 and 265 above that. Support lower may come at 204 and 200 followed by 190 and 184 before 174 and 166. Following the last 6 earnings reports the stock has moved an average of about 11% or $24 at today’s price. This makes for a range of 191 to 239. Short interest is moderate at 3.4%.

The options chain shows the at the money straddle pricing a $22 move. All of the Put open interest this week below and largest at 180 and then 175. There is a lot of activity on the 190, 180 and 175 Puts. On the Call side the open interest is mainly above and biggest at 220 and 230. Activity in weekly Calls is big at the 230 and 240 strikes. The biggest trade was a 230/240 Call Spread 600 times on the bid at about 11:24. Implied Volatility is very high for tomorrow Expiry at 200% above the November monthly at 60%.

LinkedIn, $LNKD

Trade Idea 1: Buy the October 30 Expiry 230/240 Call Spread for $2.75.
Looking for large open interest and activity today to pull the stock higher.

Trade Idea 2: Buy the October 30 Expiry 230/240/250 Call Butterfly for $1.50.
Looking for large open interest and activity today to pull the stock higher but lowering cost looking for 240 to stall any move.

Trade Idea 3: Buy the October 30 Expiry 230/235 Call Spread and sell the October 30 Expiry 180 Put for $1.00.
Leveraging the Call Spread with a short put outside of the options expected range and below the October low.

Trade Idea 4: Buy the October 30 Expiry/November 240 Call Calendar ($2.00) and sell the October 30 Expiry/November 200 Put Calendar ($1.80) for $0.20.
Looking for a longer term move beyond 240, but not above it Friday, with protection for a downside move below 200 tomorrow.

Trades like these are given to premium subscribers daily along with a weekly macro review and 10 swing trade ideas with triggers, stops and targets each week. Join here. There is still time to join today and see the ideas for Starbucks and Electronic Arts ahead of tonight’s earnings.

Get my ebook, Markets for 2015 and Beyond, a long term forecast with all proceeds going to charity.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through September 2015 and sign up here

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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