Trade of the Day: JDS Uniphase (JDSU)

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I’ve been bullish on JDS Uniphase Corporate (NASDAQ:JDSU) for a while now. At the end of 2014, I made the recommendation to buy March calls in JDSU and, ahead of the company’s earnings report Thursday, Jan. 29, I’m sending out the signal again so you can get positioned in time.

Buy to open the JDSU March 14 calls at current levels.

Wall Street will be looking for $0.16 a share on revenue north of $445 million. The high estimate has JDS Uniphase earning $0.17 a share, with a low estimate of $0.14 a share. The year-ago figure was $0.19 a share, which is a number I would love to see them match. Raised guidance for the year would also be a bonus.

If JDSU can deliver, I think the March 14 calls could easily hit my target of $1.50.

There’s no stop loss for the options at this time, as everything will hinge on the earnings report tomorrow. Support for JDSU is at $13.50-$13.25. Resistance is at $13.75-$14.

By the way, while these calls are playing for a short-term move in JDSU, I actually like the shares for a longer-term hold. It’s in my Momentum Stocks Weekly portfolio, and it’s a position I’m likely to write calls against, and I’ll let you know if I do.

As for the broader market, the bulls made a slight rebound off of the lows, but a trading range continues, with volatility once again in focus.

JDSU is part of the Nasdaq, and Apple’s (AAPL) blowout earnings results should provide a nice rebound for the index today. While the bulls held 4,675 on the Naz, there is danger to 4,625-4,600 on a close below 4,650. Resistance is at 4,700-4,725,

The Dow failed at holding 17,600, which is now resistance, after a number of disappointing earnings reports from companies within the index. The bears pushed a low of 17,288, with the bulls holding the 17,400-17,350 zone. There is additional help at 17,200-17,000.

The S&P 500 traded down to 2,019 before holding support at 2,025. There is risk to 2,010-2,000 on a close below this level. The bulls will be trying to recover resistance again at 2,040-2,050.

The small-caps showed the most strength, via the Russell 2000, in a weakened session after testing a low of 1,186. The index held fresh support at 1,190-1,185, while additional help at 1,180-1,175 was not needed. Resistance is at 1,200, but the bigger hurdle is at 1,210.

The action in the small-caps was slightly encouraging following Tuesday’s drubbing. Although I’m still bullish on the market, the divergence is making me a little nervous.

Thankfully, I have been able to avoid the pitfalls of the trading ranges, as they can crush option premiums. While the ranges have been stretched at times, the longer the trading range, the bigger the breakout or breakdown will be. The “divergence” is also giving clues that continued major moves for the indices are forthcoming, and I’ll let you know how to trade that move when it unfolds.

For now, though, the focus is on JDSU’s earnings, which will be released after the close on Thursday.

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