Technically, CA has consolidated sideways since surging in the wake of the company’s last quarterly report. Furthermore, the stock’s 14-day RSI has declined to within striking distance of oversold territory because of the recent market selloff. CA currently is sidling between its 50-day moving average near $27 and solid support near $26. The annual high sits at $28.
Those looking to capitalize on another better-than-expected quarterly report might want to consider a May 26/28 bull call spread. This trade was last offered at 85 cents, or $85 per pair of contracts. Breakeven lies at $26.85, while a maximum profit of $1.15, or $115 per pair of contracts, could be realized if CA closes at or above $28 when May options expire.
Wall Street is predicting quite a plunge in NVIDIA (NASDAQ:NVDA) first-quarter earnings when the company reports before the bell Friday. In fact, the consensus is forecasting a 54.5% drop to 10 cents per share from earnings of 22 cents per share in the year-ago period. Revenue is seen falling 4.8% year-over-year to $915.7 million.
Despite the dour outlook, NVIDIA is on solid fundamental footing from a historical basis. The company has topped expectations during the past four reporting periods, with an average upside surprise of 10.5%. This tendency to top the consensus estimate might be the reason NVIDIA’s whisper number is 20% higher at 12 cents per share.
Sentiment is mixed when it comes to NVDA. The brokerage community has issued 22 hold or worse ratings, compared to just 14 buys. On the other hand, options traders have a more positive outlook, with the stock’s front-month put/call open interest ratio arriving at 0.67. Keep in mind that May options traders are more likely to be targeting NVIDIA’s quarterly report, while analyst ratings typically have a much longer-term outlook.
From a technical perspective, NVDA has shed nearly 11% since the start of 2012. Because of the recent market weakness, NVDA’s 50-day and 200-day moving averages have completed a bearish cross, while the stock is now trading only about 8.6% away from a setting a fresh annual low. It also is worth noting that NVDA’s 14-day RSI is trading in oversold territory.
There is the possibility that NVDA will surprise to the upside Friday, but the market for high-end graphics processors (NVIDIA’s bread and butter) still is considerably weak and could remain so throughout the summer. In other words, keep an eye out for a weak forecast for next quarter.
Should the outlook remain poor for NVIDIA, a May 11/13 bearish put spread could provide options traders with a nice profit. At the close of trading Tuesday, this spread was offered at 79 cents, or $79 per pair of contracts. Breakeven lies at $12.21, while a maximum profit of $1.21 could be achieved if NVDA closes at or below $11 when May options expire.
As of this writing, Joseph Hargett did not have a position in any of the aforementioned securities, nor does he have plans to enter such a position in the next 72 hours.