Unlocked: Schlumberger and General Electric Earnings Trades

This is what I laid out for premium subscribers earlier today in Schlumberger and General Electric. Schlumberger is looking great early….

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Two names today, one that reports after the close tonight, Schlumberger, $SLB, and one before the open Friday, General Electric, $GE.

Schlumberger, $SLB
slb

Schlumberger, $SLB, stock rode lower with the fall in oil prices. It found support at 80 and based from December through to earlier this week though. That is when it broke to the upside. Heading into earnings it is holding the break out with the RSI strong in the bullish range, while the MACD is rising. There is support lower at 88.50 and 83.20 followed by 80. There is resistance and a gap to fill above at 92.80 before 100. The reaction to the last 6 earnings reports has been a move of about 2.87% on average or $2.65 making for an expected range of 88.15 to 93.50. The at-the money April Straddles suggest a larger $3.00 move by Expiry with Implied Volatility at 62% above the May at 23%. Short interest is low at 1.6%. Open interest is focused lower on the put side between 85.50 and 88 while there is large call open interest at 92.50, and spread out all through the upper 80 Strikes.

Trade Idea 1: Buy the April 91/92.5 Call Spread for 70 cents.

Trade Idea 2: Buy the April 91/92.5 1×2 Call Spread for 5 cents.

Trade Idea 3: Buy the April 91/92.5/94 Call Butterfly for $0.30.

Trade Idea 4: Buy the April/May 92.5 Call Calendar ($1.10) and sell the May 85 Put (83 cent credit) for 27 cents.

#1, #2 and #3 give the short term upside, with #2 using margin. #4 gives the longer term upside and uses leverage to lower the cost. I prefer #3 or #4.

General Electric, $GE
ge

General Electric, $GE, had been in a long consolidation under 27 until it spiked above it last week. The spike took it out of the Bollinger Bands and it has spent the last 4 days slowly consolidating the move up in a bull flag, moving back into the Bollinger Bands. The RSI bullish and has worked off the overbought spike while the MACD is going up as well. There is support lower at 27 and 26.50 followed by 26.10 and 25.80 before 24.65. There is resistance higher at 28.70 and then 30.65 and 37.50 from 2008. The reaction to the last 6 earnings reports has been a move of about 1.90% on average or $0.55 making for an expected range of 26.85 to 28. The at-the money April Straddles suggest a larger $0.65 move by Expiry with Implied Volatility at 43% above the May at 21%. Short interest is low under 1%. Open interest favors the 26 Strike in April, but there is good size above from 26.50 to 28.50. Yesterday there was a large buyer of the January 30 Calls (30,000) and today buyers are stepping into the May 28 Calls. If this holds up it is a good long term buy.

Trade Idea 1: Buy the April 27.50 Calls for $0.25

Trade Idea 2: Buy the May 27/29 Call Spread for 70 cents.

Trade Idea 3: Buy the April 27.5/27 Put Spread for $0.25.

Trade Idea 4: Buy the April 27.5/27 1×2 Put Spread for 10 cents.

Trade Idea 5: Buy the stock and sell the May 29 Call buying the April 24 Expiry 27/26 Put Spread (Collar) for 5 cents

#1 and #2 look for a move higher. #3 gives downside side and #4 adds margin and leverage. #5 gives protection on a long position for a gap fill by next week. I like #2 with #4 or #5 alone.

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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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