The bulls got their second-straight win following Wednesday’s trip into continued blue-sky territory. Small-caps led the way higher, but the rally was broad-based. Today’s session could be flat ahead of Friday’s Nonfarm Payrolls report. I recommend using the quiet environment to your advantage to get positioned in a stock that’s a favorite of mine, JDS Uniphase Corp (NASDAQ:JDSU).
JDSU shares made a backtest to their 50-day moving average, which has been holding following the October breakout above the $13 level.
The company recently reported better-than-expected earnings of $0.14 a share on revenue of $433 million. Wall Street had been expecting $0.10 a share on revenue of $416 million. JDSU has beaten estimates in three of the past four quarters.
For the current quarter, analysts are looking for a profit of $0.16 a share on sales of $445 million. There are 15 analysts that cover JDSU, and their range is for a profit of $0.14-$0.17 a share. This would mean a $0.01 beat or $0.02 miss based on those estimates, which should create enough volatility to move shares 5% or more. However, an earnings beat of $0.02 or better or a miss of $0.03 or better might move shares 10% or more.
While I also like more aggressive, shorter-term options for JDSU, the more conservative play is to look to the March series for added time.
Buy to open the JDSU March 14 calls (JDSU150320C00014000). I entered at 70 cents, and the calls closed Wednesday at 69 cents.
JDSU’s next earnings announcement isn’t due until late January, and that headline risk will remain in play if the March calls are still open by then.
There is additional risk to $12.50 and the 100-day and 200-day moving averages on a close below $12.75. Resistance for JDSU is at $13.75, which has been tested every month since September. A close above this level easily gets the upper teens in play.
If JDSU shares can top $15 by mid-March, the March 14 calls should clear $1.00 for an easy 40%-plus.
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