Whole Foods Market, Inc. (WFM) is a retailer specializing in organic and natural foods and groceries. The company’s stock is currently trading around $30.80 in a 52 week range of $29.73-$57.57. The stock has been massively under performing the market this year with shares falling nearly 39% year to date. The company is set to report earnings after the bell today and based on metrics we track the stock may be primed for another move lower.

WFM has sold off on 6 of the past 8 quarters with an average move of 9.8% on earnings day. The stock is also looking vey weak on a chart. The stock is lower by over 1.2% today and the Ichimoku Cloud is indicating a strong bearish trend in WFM. The stock is trading well below the cloud and the future cloud is sloping lower. Using our AlphaTracker Indicator we are also able to see that big money is net short WFM stock ahead of the release. For all of these reasons I am looking to get short WFM on earnings.
With the options market implying a move of around $3.20 by this Friday’s close we are able to calculate a downside target of $27.60. Using this level I can set up a potential options trade.

Trade: Buying the WFM Nov 6th Weekly 29.5-27.5 for $0.55
Risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $28.95

This trade gives a trader a reward to risk ratio better than 2.5-1

Mobileye NV (MBLY) is a developer of software and technology for driver assistance systems and other sensor components in vehicles. The company’s stock is currently trading around $45.30 in a 52 week range of $32.41-$64.48. The stock has performed relatively well this year with shares higher by 11.5% year to date. The company is set to release their most recent quarterly earnings before the opening bell in tomorrow’s session.

MBLY has a relatively weak performance record on earnings day. The stock is lower 4 of the past 6 quarters with an average move of around 2.2%. This shows us a historical pattern of bearish price action on earnings. The chart of MBLY also appears to be confirming this pattern. The stock is now trading well below the Ichimoku Cloud and the cloud is firmly downward sloping. The stock is also trading below value for the month indicating a general bearish sentiment in MBLY going into earnings. With bearish historical price action and a bearish chart setup MBLY seems primed for a move lower on earnings.

With the options market implying move of around $4.30 by Friday’s close we can calculate a downside measured move of 9.5% for MBLY. Using the target I can look to set up an options trade with an expectation for the stock to trade around $41.00 by Friday.

Trade: Buying the MBLY Nov 6th Weekly 43-41 Put Spreads for $0.40
Risk: $40 per 1 lot
Reward: $160 per 1 lot
Breakeven: $42.60

This trade sets up right on the downside measured move target and gives a trader a 4-1 reward to risk setup.

SolarCity Corporation (SCTY) is a renewable energy company based in California. The company’s stock is currently trading around $29.77 in today’s session and is lower by nearly 22% on the day. The stock has had absolutely dismal performance this year falling nearly 45% year to date. The stock is lower today on quarterly earnings and our head catalyst trader was short ahead of earnings. Here’s how he set up his trade and knew to get short.

SCTY had a bearish historical earnings performance record having sold off 7 of the past 10 quarters with an average move of 7.67%. The chart was also showing bearish patterns going into the release of earnings. The stock was trading well below the Ichimoku Cloud and was also below both of its major moving averages. The cloud was also aggressively sloping lower going into the report. AlphaShark’s AlphaTracker indicator was also showing institutional money positioned net short ahead of the report. With those factors in mind it appeared that SCTY was setting up well for a short.

Using the options market our trader calculated an implied move of $4.25 by today’s close in SCTY. Using this measure a downside target of $33.95 was calculated and an options spread was selected

Trade: Bought the SCTY Oct 30th Weekly 36-34 Put Spreads for $0.55
Risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $35.45

As the stock gapped lower this morning and continued to sell off our trader was able to exit this spread for $1.98 more than tripling his money overnight.

MasterCard Incorporated (MA) is a global transaction and payments company with operations around the world. The company’s stock is currently trading around $99.90 in a 52 week range of $74.47-$99.93. The stock has been performing relatively well this year with shares rallying nearly 15.7% year to date. MA is set to report earnings tomorrow morning and early indications point to a possible rally on earnings day.

MA has rallied 8 of the past 12 quarters with an average move of 3.24%. The stock is also higher 10 of the past 12 quarters form earnings day to expiry. The stock is also looking very strong on the Ichimoku Cloud with shares trading well above the Ichimoku cloud and the stock is just off of 52 week highs. With both historical movement trands and the chart showing bullish patterns I want to be long MA into earnings.

The options market is implying a move of around $3.20 I want to calculate an upside target and set up an options trade. Using this implied move I will set up a trade with a target of $103.10.

Trade: Buying the MA Oct 30th Weekly 101-103 Call Spreads for $0.60
Risk: $60 per 1 lot
Reward: $140 per 1 lot
Breakeven: $101.60

This trade goes to max value if the stock moved to the measured move target and also offers a trader a reward to risk ratio of better than 2-1.

Comcast Corporation (CMCSA) is a media company operating a wide range of communications and broadcasting businesses. The company’s stock is currently trading around $62.00 in a 52 week range of $50.01-$64.99. CMCSA is set to report their most recent quarterly earnings tomorrow morning before the market open. Based on the price action and historical earnings record in CMCSA I think it is setting up well for a bullish options play ahead of the report.

CMCSA has rallied 9 of the past 12 quarters on earnings day with an average move of 2.85%. The stock is also higher 9 of 12 times from earnings day to expiry. The stock is also setting up well on a chart. The stock is trading well above the Ichimoku Cloud and has been in bullish territory since breaking higher earlier this month. The stock is moderately higher today but with shares trading well above the cloud and the historical movement record showing a clear bullish patter I would want to get long CMCSA via weekly options.
Using the options market we can calculate an implied move of $2.30 by Friday’s close. With stock at current levels that would give me an upside target of $64.30 by Friday. Using this level I will set up an options spread.

Trade: Buying the CMCSA Oct 30th Weekly 63-64 Call Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $63.30

With this trade I have a better than 2-1 reward to risk ratio and a max profit if the stock trades to the calculated measured move target.

American Express Company (AXP) is a global consumer credit card and merchant services company. The company’s stock is trading around $72.10 in today’s session, falling over 5.75% after the company released earnings after the bell yesterday. The stock is lower by more than $4.40 and has traded as low as $71.40 this morning as the firm missed analyst estimates on both EPS and revenues. The firm reported earnings of $1.24/share against estimates of $1.30/share and revenues of $8.2 billion vs. estimates of $8.38 billion. After such dismal numbers short sellers in AXP are celebrating this morning. Our traders caught this move to the downside by establishing a short position ahead of earnings in AXP here’s how they did it.

AXP had a very disappointing track record on earnings day over the past 12 quarters so our expectations were for the stock to be under pressure after this release. In the past 12 releases the stock had sold off 8 times from earnings day to options expiration with an average move of 3.26%. Ahead of the release market makers were implying a move of around $2.30 from the stocks pre-earnings price of $76.75 through the end of the week. Technically AXP was looking rather weak on a chart as well. The stock was trading inside of the Ichimoku Cloud but had failed to break old upside resistance into the report. With a bearish historical track record and a neutral chart our trader wanted to get short AXP into earnings.
Using the implied move of $2.30 a downside target for Friday’s close of $74.45 was calculated and an options spreads was selected.

Our trader bought the AXP Oct 23rd Weekly 75.5-74.5 Put Spreads for $0.28
Risk: $28 per 1 lot
Reward: $72 per 1 lot
Breakeven: $75.22

On the open this morning our trader was able to exit these spreads for $0.96 more than tripling his money overnight. This is a perfect example of how a thoughtful analysis ahead of earnings can lead to huge winners.

Here we are in another sea of red— not literally but as I look across the board and scroll through my twitter feed, texts, and emails… the theme is PANIC, SELL, OFFER… I just don’t get why… that being said, it doesn’t matter what happened, or why, — *where are we going next, and how am I going to manage risk through it, is what I am thinking.

After a strong rally in Gold last week, we have retraced into and through the weekend, with all the metals trading at a discount to their closing prices of last week. (Not going to even get into Platinum with all this Volkswagen talk “pricing” into it, but that market at 917 is relatively cheap imo). To me, gold is literally treasure, I mean as people want to throw it out, I have generally been a bull for the shiny historic safe haven, — every book, movie, story, almost always gold has been around, and it has had/held value above other assets and currencies. I haven’t seen many stories where gold is completely worthless, or not desired… that being said, I guess for now, even as stocks sold off today, and the USD — people didn’t want Gold. (For some reason US Treasuries were preferred as people looked for a flight to quality). — Oh.. But “we are going to raise rates this year”, ha, so not like those note and bond prices aren’t gunna have downward pressure… they were perma-bid today. Gold GC sits @ 1132 and is currently trading +.30 or +0.03% for Tuesday.

Next, even though there was a firm short squeeze and bounce higher in natty gas over the weekend, as many did expect this seasonally… this wasn’t enough to bring the energy sector higher, nor a bid to the main event, Crude Oil. The CL contract at the CME was down over -1.27, settling at 44.43… although I never like to see Oil in the red, especially in this exact market environment, we are in good company, as we have been range bound often rallying back above and through 45-47 when we have dipped to this level. I had blogged and been tweeting about the ridiculous back to back draws in the data like API/EIA for Crude inventories (but no sustained rally), I guess we will see this week starting tomorrow with API (after Tuesday close) and then Wednesday the headline EIA Petroleum Status Report will provide some serious color on the “supply” story regarding Crude. Nothing to write home about, but currently since the 5pm open, Crude Oil (CL) for Nov is trading +.09 +0.20% @ 44.52… Although this is not a large move, it is encouraging that the first reaction for whatever reason, is green, and heading towards being greater than 44.50— the key is to be around for the move higher, but sometimes we see markets have to get down, to get back up. I would not be able to really stay in Gold, or a Crude Oil especially if it wasn’t for using puts / hedging / stops, basically it is important to just be able to stay in the game and live to trade another day, so we can see if today’s trash truly can be tomorrow’s treasure.

The last market I am looking at and always focused on is the all mighty Spoos — which are the E- Mini S&P 500 Futures. The ES settled deep in the red a whooping -47.25 points, to mark at 1872.00– this level required me to step back and check out “where we are” in the stocks. I wanted to take a look at the 2 hour over a few days, and then look at a multi year in week ticks… It brings me back to the opportunity earlier this year the week of 8/24/15 as well as “coincidentally” looks similar or giving me deja vu to just past this time last year as the BTD mentality rocketed stocks higher into 2014 year-end after a dip lower last Sept-October (to this sub 1900 level). Tonight the market is in Asia-Europes hand before we get Redbook, Consumer Confidence, and really the week started– Calendar looks busy, especially come Wednesday. — The key is to be in the game for those moments, and to be able to trade them!

Currently the Spoos ES are trading @ 1877.25 +5.25 +0.28% — Let’s see where they go into EOM and weekly, as well as option month expiration approaching.

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

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