Premium Earnings 6-23-14

• Posted by Greg Harmon
• on June 23rd, 2014

{+++} Two names today, one that reports after the close tonight, Micron Technologies, $MU, and one before the open Tuesday, Carnival, $CCL.

Micron Technologies, $MU

Micron Technologies, $MU, has been rising in a wedge since April. The last week it has consolidated after touching the top of the wedge with the Relative Strength Index (RSI) overbought but flat and not extreme but with a MACD about to cross down and falling. There is support at 31.55 and a gap to fill lower at 30.12 followed by 29.50 and 28.50. There is resistance higher at 32.43 and then free air with a Measured Move higher to 35. The reaction to the last 6 earnings reports has been a move of about 7.78% on average or $2.50 making for an expected range of 29.70 to 34.30. The at-the money June Straddles suggest a similar $2.40 move by Expiry with Implied Volatility at 85% above the July at 46%. Short interest is high at 10%. There were June 30/27 1×2 Put Spreads traded today 7800 times and Friday in size as well.

Trade Idea 1: Buy the June 31/30-29 1×2 Put Spread for $0.05.

Trade Idea 2: Buy the June 32.5/34 1×2 Call Spread for 15 cents.

Trade Idea 3: Buy the July 32/34 Call Spread and sell the July 11 33.5 Call for 5 cents.

I like #1 and #2 together, and then #3.

Carnival, $CCL

Carnival, $CCL, took two steps higher from October to a triangle shaped consolidation. This is showing up in a lot of charts now. Into earnings it is rising with the RSI turning up giving a Positive RSI Divergence that targets 40.85. The MACD is turning back higher as well. Resistance is found at 40.70-40.85 and then 41.70 before some free air. Support lower may come at 38 and 37 followed by 35.80. The reaction to the last 6 earnings reports has been a move of about 4.50% on average or $1.80 making for an expected range of 37.65 to 41.30. The at-the money July Straddles suggest a larger $2.50 move by Expiry with Implied Volatility at 28% above the August at 20%. Short interest is low at 2%. There were buyers in the July 40 Calls Friday and today sees activity in the 37 Puts. Open interest favors it staying in a range between 40 and 41 at expiry.

Trade Idea 1: Buy the July 40/41 Call Spread for $0.45.

Trade Idea 2: Buy the July 40/41 1×2 Call Spread for a $0.10 credit.

Trade Idea 3: Buy the July 39/38-37 1×2 Put Spread for 5 cents.

Trade Idea 4: Sell the July 38/41 Strangle for a $1.20 credit.

I like #2 and #3 together and #1 if you cannot take on margin.

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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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