Premium Earnings 3-7-12, Opus I

I have had a few questions about MensWearhouse, $MW that also reports tonight.

Men’s Wearhouse, $MW

Men’s Wearhouse, $MW, has had a long run higher in an ascending channel since gapping higher after earnings in December. Resistance is found at 40.30 and then 42.50 from 2007, a long time ago. Support is at 38 and 36 followed by 35 and 34. The Relative Strength Index (RSI) is bullish and strong while the Moving Average Convergence Divergence (MACD) indicator is negative but stalled at a low level. This chart has a upward bias. Short interest at 10% makes it more interesting. The reaction to the last 6 earnings reports has been a move of about 10.9% on average or $4.35 making for an expected range of 35.55 to 44.25. The at-the money March Straddles imply a smaller move of $3.50 by Expiry next week. Implied volatility at 72% is high compared to the historical at 26%, and the April options at 45%. I like it higher but it has had a big run and some like it for a fade after earnings.

Bullish

Trade Idea 1: Buy the March 41/44 Call Spreads for $1.00.

Trade Idea 2: Buy the March 41/44 Call Spreads selling the 36 Put for 60 cents.

Trade Idea 3: Buy the March 41/43/45 Call Call Butterfly for 70 cents.

Bearish Fade

Trade Idea 4: Buy the March 39/36 Put Spread for a $1.00.

Trade Idea 5: Buy the March 39/37/35 Put Butterfly for 65 cents.

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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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