United Parcel Service, Inc. (UPS) is a package delivery company providing global supply chain management solutions and delivers packages in over 220 countries and territories providing control and visibility of customer’s inventories. The stock is currently trading around $95.04 at the lower end of its 52 week range of $94.05-$114.40. The stock has been under performing the market this year falling 14.54% year to date. UPS is scheduled to report earnings before the opening bell tomorrow, and the stock is up $0.29 or 0.31% on the session ahead of the close.
Over the past 12 quarters UPS has rallied on earnings day 7 times with an average move of 2.12%. The stock appears bearish on a chart going into the release having traded below or in the Ichimoku Cloud since mid-June on the daily bars. Over the past 12 quarters UPS has rallied from earnings to the nearest options expiration 6 times with an average move of 2.45%. The stock looks as if it could continue today’s trend and rip to the upside after receiving a lot of support from the 52 week low. Investors expect to see growth of 6% to 12% in EPS based off of the estimate UPS has given. With strong earnings rallies, support from the 52-week low and positive news pertaining to earnings it is hard to justify anything, but a long position on UPS.
The options market is currently implying a move of around $3.64 or 3.8% in UPS by this Friday’s close giving us targets of $91.54 and $98.82.
Trade: Buy this week’s 97-98 Vertical call spread for $0.28
Risk: $28 per lot
Reward: $72 per lot
Break Even: $97.28