Unlocked Premium Earnings 2-13-12 part 1 – Rackspace Hosting

Rackspace Hosting, $RAX, reports tonight and had a good look to it.

Rackspace Hosting, $RAX

Rackspace Hosting, $RAX, is in a bull flag after breaking through the neckline of an Inverse head and Shoulders pattern 2 weeks ago. The target on a break of the flag higher is 55 and the Inverse Head and Shoulders Price objective is at least 60.80. The only resistance is the top of the flag near 50. Support lower can be found at 47 and 46.40 followed by 46.10 and 45.40 near the neckline before 44.50 and 42. The Relative Strength Index (RSI) is bullish and stopped falling with a Moving Average Convergence Divergence (MACD) indicator that is positive but fading. The chart is biased higher but there are topping candles. The reaction to the last 6 earnings reports has been a move of about 4.2% on average or $2.00 at today’s price for a range of 47.20 to 51.20. The at-the money Straddles suggests a bigger move of $3.80 by February Expiry, Friday. Implied volatility at 93% is high compared to the historical at 29%, and March options at 47%. The biggest activity today was a purchase of 1400 February 50/48 Put Spreads at 10:23 today, a bearish bet.

Trade Idea 1: Buy the February 50 Calls for $1.50.

Trade Idea 2: Sell the February 45 Puts for 45 cents.

Trade Idea 3: Buy the February 50/45 bull Risk Reversal for $1.05.

Trade Idea 4: Sell the February 49 Straddle for $3.55.

a couple for the morning in a bit.

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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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