Premium Earnings 3-21-13

• Posted by Greg Harmon
• on March 21st, 2013

Two names today one that reports Thursday after the close Nike, $NKE, and one that reports before the open Friday, Tiffany’s, $TIF.

Nike, $NKE

Nike, $NKE, has been an enigma for the last 2 months consolidating in the Potential Reversal Zone (PRZ) of a bearish Bat between 53.71 and 55.10. The 50 day Simple Moving Average (SMA) has acted as support during this consolidation. The Relative Strength Index (RSI) is barely bullish and has been drifting lower with a Moving Average Convergence Divergence (MACD) indicator that is also drifting lower. A neutral bias but with a slight downside bent. Support lower comes at 53.25 and 52.75 followed by 52.10 and 50.75 before 49.55 and 48.35. The initial price objective from the Bat takes it to 47.77. Resistance higher is found at 55.25 and 56.60 with free air above that. The reaction to the last 6 earnings reports has been a move of about 4.70% on average or $2.55 making for an expected range of 51.20 to 56.15. The at-the money weekly March Straddles suggest a similar $2.40 move by Expiry with Implied Volatility at 87% well above the April at 24% and May at 22%. This has needed to pullback for a long time and has not. Careful with size so as not to risk a lot of capital.

Trade Idea 1: Buy the April 52.5/55 Strangle for $2.10.

Trade Idea 2: Buy the April 52.5/55 Strangle selling the March22 Weekly 52.5/55 Strangle for $0.90.

Trade Idea 3: Buy the March 28 52.5 Put for $0.76.

Trade Idea 4: Buy the April 52.5/47.5 Put Spreads for $0.80.

Trade Idea 5: Buy the March 28/May 52.5/50 Put Diagonal, buying the March 22 52.5 Put and selling the April 50 Put, for $0.06.
This is playing for a recovery by May expiry from any pullback.

I like #5 best with #2 a good second choice

Tiffany’s, $TIF

Tiffany’s, $TIF, has been moving higher in a step wise fashion since support at 55.50. The 20 day SMA has acted as support in the current bull flag. The RSI is bullish and but moving down with a MACD indicator that is drifting lower off of the highs. A upside bias. Support lower comes at 68 and 66 followed by 61 and 55.50. Resistance higher is found at 70.75 and 72.65 before 78.62 and 81.70. Note that the Measured Move higher takes it to 77.61 and it is also building a Deep Crab Pattern with a PRZ at 80.27. The reaction to the last 6 earnings reports has been a move of about 7.48% on average or $5.15 making for an expected range of 63.30 to 73.75. The at-the money March weekly Straddles suggest a smaller $4.35 move by Expiry with Implied Volatility at 130% above the April at 33% and the May at 27%.

Trade Idea 1: Buy the March22 70/75 Call Spread for $1.21.

Trade Idea 2: Buy the April 70/75 Call Spread for $1.45.

Trade Idea 3: Buy the March22/April 72.5 Call Calendar for $0.45.

Trade Idea 4: Buy the March22 70/72.5/75 Call Butterfly for $0.25.

All are similar, I like them in order: #4, #3, #2 then #1.

I will likely send out another freebie for the world today on Darden, $DRI as well.

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