Sellers dictate action Nike (NKE) at Micron technology (MU) before the upcoming earnings reports. After repeated resistance to the 10-week moving average, Nike’s stock has fallen more than 40% from its high with earnings to be paid on Monday after closing.
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Like Nike stock, Micron is also in a downtrend despite strong fundamentals and relatively good growth prospects.
When Micron reported earnings in late March, shares initially rose more than 5%, but MU’s stock fell in a spectacular way, falling 3.5% in heavy volume. Sellers hit the stock despite news that adjusted profit rose 118% from the quarter last year. Revenue increased 25% to $ 7.79 billion. Micron also raised its earnings guidance for its fiscal third quarter by approximately $ 500 million.
Micron is the largest US maker of memory chips. The recent results were helped by strong demand from data center customers. Micron memory chips have long been used in personal computers and smartphones, but the industrial and automotive markets are also seeing strong growth.
Results from Micron are set for Thursday after closing. Zacks’s consensus estimate expects adjusted profit of $ 2.45 per share, up 30% from the previous quarter, with revenue rising 17% to $ 8.69 billion.
Nike Stock Looking Below
Results from Nike are set for late Monday. When the company reported earnings in March, the company said consumer demand for its products continued to exceed supply. But like many other Wall Street companies, Nike is dealing with supply-chain challenges including higher freight and logistics costs.
Adjusted profit fell 3% annually to 87 cents per share. Revenue growth accelerated from the previous quarter, rising 5% to $ 10.9 billion. North American sales; Europe, the Middle East and Africa and Asia Pacific and Latin America showed sales increases. But revenue in Greater China dropped 5% to $ 2.16 billion.
Nike’s focus went to direct-to-consumer sales under the leadership of John Donahoe, former CEO of Service Today (NOW). Donahoe took over the role of CEO in January 2020.
In the most recent quarter, direct business revenue rose 17% to $ 4.6 billion, making up 42% of total revenue.
For the current quarter, adjusted profit is expected to fall 12% to 82 cents a share, with revenue declining 2% to $ 12.1 billion.
General Mills, Constellation Brands Scheduled to Report
Watch other earnings reports in the coming weeks from General Mills (GIS) at Constellation Brands (STZ). Both stocks are less than 10% from their highest.
General Mills, known for brands like Annie’s, Betty Crocker and Haagen-Daz as well as cereal brands like Cheerios and Chex, pays a quarterly dividend of 51 cents per share, giving it an annual yield that approximately 3%.
Revenues from General Mills must be paid early on Wednesday. Look for profit to rise 11% to $ 1.01 per share, with revenue to rise 6% to $ 4.8 billion.
The company on Wednesday completed its acquisition of TNT Crust, a maker of frozen pizza crusts for regional and national pizza chains, food service distributors and retail outlets. Terms were not disclosed, but TNT Crust made $ 100 million in sales in 2021.
Constellation Brands reported on Thursday before opening. Adjusted income is seen rising 7% to $ 2.50 per share. Revenue is expected to increase 8% to $ 2.19 billion.
The producer and marketer of beer, wine and spirits owns a 38.6% stake in the cannabis company Canopy growth (CGC), rose sharply from Constellation’s 9.9% stake in 2017 when it first invested in marijuana producers in Canada. Constellation’s former CFO, David Klein, is now the CEO at Canopy Growth.
Options Trading Strategy
A basic strategy of trading options around profits using calling options allows you to buy stocks at a predetermined price without taking huge risk. Here’s how the options trading strategy works.
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Placement options are for poor performers with bearish charts. The only difference is that the out-of-the-money strike price is just lower than the underlying stock price.
First, identify the stocks with the highest rating with a bullish chart. Some may be setting up sound early-stage bases. Others may have already broken out and are getting support on their 10-week moving average for the first time. Some may trade strictly near the high and refuse to give much land. Avoid extended stocks beyond the correct entry points.
In options trading, the call option is a bullish bet on a stock. Placement options are bearish bets. A call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price. A put option gives the holder the right to sell 100 shares of a stock at a specified price. You get profits when the stock falls below the strike price with a put option.
Check Strike Prices
Once you’ve identified some bullish revenue setups for a calling option, look at the strike prices at your brokerage. Make sure the option is liquid, with a fairly tight spread between bid and ask. Find a strike price just above the underlying stock price (from the currency) and see the premium. The premium should not exceed 4% of the underlying stock price at that time. In some situations, the in-the-money strike price is OK as long as the premium is not too expensive.
Choose an expiration date that fits your risk objective. But remember that time is money in the options market. Nearby expiration dates will have cheaper premiums than those out there yet. Buying time on market options comes at a higher cost.
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The trading strategy of these options allows you to maximize a bullish earnings report without taking too much risk. The risk is equal to the value of the option. If stock gaps decrease in earnings, the most that can be lost is the amount paid for the contract.
Placement options are for poor performers with bearish charts. The only difference is that the out-of-the-money strike price is just lower than the underlying stock price.
Nike Stock Option Trade
Here’s how a call option trade recently searched Nike stock.
When Nike traded around 106.50, a relatively unaffordable weekly calling option with a 107 strike price (July 8 expiration) had a premium of approximately $ 4.40, or 4.1% of the underlying stock price. at that time.
One contract gave the holder the right to buy 100 shares of Nike stock at 107 per share. The maximum that can be lost is $ 440-the amount paid for the 100-share contract.
When considering the premium paid, Nike’s stock needs to exceed 111.40 for the trade to start making money (107 strike price plus $ 4.40 premium).
Note that this trading option is not for a small portfolio. If the option is exercised, the purchase of 100 shares of Nike stock would cost $ 10,700.
Follow Ken Shreve on Twitter @IBD_KShreve for further analysis and insight into the stock market
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