LOW – Lowe’s Companies, Inc.
Trade idea: Buy to open the July 21st 75x puts currently trading at about $0.85
Targets: $74.75 – $75
LOW reported earnings last week and unlike its peer Home Depot (HD), the company missed estimates sending the stock lower by nearly 5%. Although it likely won’t have an impact on the stock, the company does have an upcoming shareholder meeting this Friday, June 2nd, at 10:00 AM EST.
From a technical perspective the stock failed to show any continuation last week after nearly filling the gap from its earnings miss on a bounce. It in fact continued lower from that bounce to new lows for the month today. Now going into June, monthly price action is very bearish and signaling further downside next month. With confirmation below $78.10 in June the next key support level to watch will be at $74.75 – $75.
The trade idea: Buy to open the July 21st 75x puts currently trading at about $0.85 only if there is confirmation below $78.10 next month.
SIG – Signet Jewelers Limited
Trade idea: Buy to open the July 21st 45x puts currently trading at about $0.45
Targets: $49 – $49.50, $42.50 – $43
SIG is set to report 1Q17 earnings on Thursday, May 25th, pre market with the conference call scheduled for 8:30 AM EST. Analysts expect the company to report EPS of $1.68 and $1.5B in revenues. Over the last 4 quarters the stock has had an average maximum move of 13.2% on earnings and options are currently pricing in about an 11.3% move either way for Thursday’s report.
From a technical perspective the stock remains in a strong long term downtrend as it continues to struggle with other retailers. Signet has also been in the news a lot recently which started last year as the company was accused of swapping out customers diamonds for fake ones. This was followed by sexual harassment claims earlier in March. The stock is now trading at its lowest levels since early 2013 and it doesn’t appear to be bottoming anytime soon as it continues to signal further downside. With a miss on earnings this Thursday the next support levels to watch will be at $49 – $49.50 which could be tested by the end of May. If that support is broken through then it would signal further downside to the $42.50 – $43 level likely by June – July.
The trade idea: Buy to open the July 21st 45x puts currently trading at about $0.45