Which Pitchfork Option at the Family Dollar Store

The Family Dollar Store (ticker: $FDO) releases earnings Wednesday morning before the market opens. These events can have a large impact on a stock price, or as from the last report a very minimal impact. Sometimes there are clues in the price action prior to the earnings release. Look at the chart for $FDO below. This stock has spent a lot of time between 51 and 54 over the last 3 months.

The Relative Strength Index (RSI) is vacillating around the mid line and a Moving Average Convergence Divergence (MACD) that is crossing back and forth around zero. No real guidance from those. Notice that as it comes into earnings it is also at a crossroads of the two Andrew’s Pitchforks. The green Lower Median Line is looking to carry it higher through July while the Red Upper Median Line looks to keep it from rising. As these two intersect it will have to choose a path and what better time to do that than after the earnings release. If it does make a move and jumps one of the Median Lines, expect it to stall for a little bit as it decides if it with retest that line or move to the central Median Line. With that thought in mind the options market presents an earnings trade.

Trade Idea: Sell July 55/50 Strangles

From the closing board of the July options from Monday selling the July 55 call for 65 cents and selling the July 50 put for 90 cents, or a total of $1.55 for the Strangle, gives you protection for a move from 48.45 up to 56.55 by July 15. A 15% band, 7.5% up and down from the close at 52.33, around a stock that has realized volatility of 21.14%.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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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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