I am trying to push my luck with another earnings play. After getting lucky with my last call, I think it is time to try again with two more plays (or till I get it wrong, then I will go back into my earnings play hibernation).
1) APC (ANADARKO):
Reports tomorrow (Monday) after the close. If based on fundamentals only, it looks good going into earnings. On a scale of 1 to 10, I will give it 7 or 8. But I think it will drop after the report based on technicals. On April 3rd it soared 14% after agreeing to a $5.15 billion settlement. It now has every reason to give back those gains as folks who jumped in expecting a rally from the news start realizing that it wasn't what they expected since it hasn't moved ever since.
I don't know how the $5.15 billion will factor into its earnings, but it cannot be good (unless it is used as an excuse to rally the stock after bad earnings). But even if it moves higher, I don't think it will be much given such a big news-driven move recently. There is much room to move lower though.
What to look for:
Currently at $99.57 expect a drop back to the April 2nd levels of about $87 soon.
How to play it:
Buy Put options. July options would have been good, but they are not available at this time. So June or August. Note that you have to risk 100% in the trade.
2) TSLA (TESLA):
Reports on Wednesday after the close. Its fundamentals doesn't look good. On a scale of 1 to 10, I will give it a 3 or 4 (with 4 being generous). But usually companies that look bad on paper are the ones that tend to make the biggest upside moves when they report good numbers. So my low rating doesn't mean much. Also, TSLA has the habit of blowing away earnings estimate. Where I think it will likely come up short is with forward guidance.
Technically (see charts in weekend post), it can go either way though I favor a drop after it reports.
What to look for:
Currently at $210.90, if we see we see a move up to 230 going into the report, then expect a drop after it reports. But if we see it move lower from current level going into the report, then expect a run up after it reports. So how it acts on Monday-Wednesday will be key.
I believe we will see a move to 230 before the close on Wednesday followed by a drop to 175 shortly after it reports.
How to play it:
Buy Put options outright or buy ATM/ITM Put options and OTM Calls to protect the Puts just in case it runs up after the report i.e Strangle. Make sure to risk 100% in the trade.
Also note that if the setup from Monday to Wednesday goes as predicted, then it will be great since you can use the market's money to make the earnings play.
