Trade of the Day: Sony (SNE)

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It’s been an exciting week, and now that Fed Head Janet Yellen’s Jackson Hole speech is in, today’s session will show whether a continued summer rally is in store into next week and through August — or a “sell the news” event is in the works.

On Thursday, the Dow jumped 60 points, or 0.4%, to end at 17,039.The next level of resistance is at 17,100 and the all-time high of 17,151. If cleared, I expect a run to 17,200-17,350…but support is at 16,800 and then 16,600 if the action gets nasty today.

The Nasdaq added 5 points, or 0.1%, to settle yesterday at 4,532. The bulls could push 4,550-4,600 today or next week on continued strength, while a drop below 4,500 likely leads to 4,450-4,400. The S&P 500, meanwhile, is very close to my near-term target; having popped a six-pack to finish Thursday at 1,992 and a new all-time closing high, that index should clear 2,000 with a solid session.

The Russell 2000 advanced 2 points, or 0.2%, to close Thursday at 1,160.03. The small-caps struggled at the open and fell below the 1,150 level to 1,147 before reclaiming resistance at 1,160 by a nose. This appears to be a bullish sign, but negativity in today’s action could spell trouble. It is entirely possible a near-term 20-point move is in store today or into next week. A close above 1,175 would be the all aboard sign that might get Wall Streeters back from vacation early. A close below 1,140 could have them kicking it back until September, saying “I told you so.”

For today we’re going to stick with a large cap, Sony (SNE), as I have a feeling that the company is going to report an outstanding quarter. Apparently, Wall Street has no clue the company exists, as there is no analyst coverage of the stock. Yes, Sony is based in Japan, but shares trade on the U.S. exchanges. Anyway, if they report a blowout quarter, the suit-and-ties could notice and “initiate” coverage of the stock.

This doesn’t mean they did their homework, however, and they will essentially be doing what I like to call “jumping on the bandwagon.”

To take this a step further, I think that Apple (AAPL) should buy Sony. Just pull the trigger, Tim. The company has a market cap just south of $20 billion. Apple could offer $30 billion, or $27-$28 a share, and Wall Street would wet its pants.

Apple would have made a major acquisition to brag about, they would have a finger in the TV pie, and — to totally make this a hat trick — their money would be overseas if they moved their headquarters to Japan.

Japan’s corporate tax rate is already cheaper than in the United States (at 35%), and thanks to “Abenomics,” they’re planning to cut it further to 30%, compared to the U.S. tax of about 39% depending on the state. So the deal makes sense. But while a merger might produce good business synergies, I’m sure our government officials would be a little ticked off if one of the largest companies in the world packed up their offices and moved offshore.

Either way, if more attention gets put on Sony either from a possible takeover or just from a great earnings report, the call options are going to do great. I’m recommending three SNE option positions for my Momentum Options subscribers, and here’s one you can act on today.

Buy the SNE Oct. 20 calls (SNE141018C00020000) at current levels, and I expect them to double or even triple from here; my exit target is $0.50-$0.75. A close above $19 should get $20 in play. Support is moving up, and I would like to see $18.75 hold on any pullback.


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