Premium Earnings 11-21-19: Nordstrom and Foot Locker

Two names today one that reports after the close tonight, Nordstrom, $JWN, and one that reports before the open Friday, Foot Locker, $FL.

Nordstrom, $JWN

Nordstrom, $JWN, finally found a bottom after a long run lower in August. It has been rising since, but ran into resistance shortly after crossing the 200 day SMA in October. It pulled back and then retested the resistance level earlier this week, falling back a second time. Into the report it is trying to move higher off of a higher low and has a RSI sitting at the bottom edge of the bullish zone with the MACD dropping but positive. There is support lower at 32 and 30.85 then 28.50 before 26.20 and 25.25. There is resistance above at 35.35 and 36.50 then 38.15 before 42.75. The reaction to the last 6 earnings reports has been a move of about 10.67% on average or $3.65 making for an expected range of 30.25 to 37.75. The at-the money November 22 Expiry Straddles suggest a similar $3.70 move by Expiry with Implied Volatility at 238% above the December at 60%. Short interest is high at nearly 30%. Open interest is biggest at 33 and 31 on the Put Side. On the Call side it is biggest at 45 but mainly spread from 34 to 35 and then from 37.50 to 40.

Trade Idea 1: Buy the November 22 Expiry 33.50/31.50 1×2 Put Spread for 5 cents.

Trade Idea 2: Buy the November 22 Expiry 34.50/36 Call Spread ($0.65) and sell the November 22 Expiry 31 Put for 10 cents.

Trade Idea 3: Buy the November 22 Expiry/December 39 Call Calendar ($0.40) and sell the November 22 Expiry 30 Put for free.

Trade Idea 4: Sell the November 22 Expiry 30/39 Strangle for a $0.65 credit.

#1 gives the downside with leverage and a possible entry at 31.50. #2 and #3 give the upside using leverage and may put you in the stock at 31 (#2) or 30 (#3). #4 is profitable on a close between 29.35 and 39.65 at Expiry. I prefer #3.

Foot Locker, $FL

Foot Locker, $FL, gapped down in May and has not recovered. It moved sideways in a tight channel 10 weeks before a break down to an August low. Since then it has trended higher but that is in jeopardy into the report as price falls back under support at what was prior resistance. It has a RSI falling into the bearish zone with the MACD dropping and about to turn negative. There is support lower at 40.65 and 39.30 then 37 and 33.80. There is resistance above at 43.45 and 45.20 then 47.70 and a gap to fill to 52.35. The reaction to the last 6 earnings reports has been a move of about 13.0% on average or $5.50 making for an expected range of 36.50 to 47.50. The at-the money November 22 Expiry Straddles suggest a smaller $5.00 move by Expiry with Implied Volatility at 261% above the December at 62%. Short interest is elevated at 8.9%. Open interest is focused from 41 to 42 on the Put Side. On the Call side it builds from 44.50 to 46 then tails to 48.50 but spikes at 49.50.

Trade Idea 1: Buy the November 42/39.50 1×2 Put Spread for free.

Trade Idea 2: Buy the November 22 Expiry 42.50/45.50 Call Spread ($1.10) and sell the November 22 Expiry 38 Put for $0.30.

Trade Idea 3: Buy the November 22 Expiry/December 46 Call Calendar ($0.55) and sell the November 22 Expiry 37 Put for free.

Trade Idea 4: Sell the November 22 Expiry 36.50/48 Strangle for a $1.00 credit.

#1 gives the downside with leverage and a possible entry at 39.50. #2 and #3 give the upside using leverage and may put you in the stock at 38 (#2) or 37 (#3). #4 is profitable on a close between 35.50 and 49 at Expiry. I prefer #3 or #4.

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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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