#$tpx

Technical analysis of major US ETFs and some individual stock names.

Here are some of the stocks the Yahoo Finance team will be tracking for you today:

Nike (NKE) shares fell in early trading as a metric that gauges future orders was weaker than expected and that’s fueling concerns about the company’s growth prospects going forward. The sneaker giant delivered a beat on both its top and bottom lines as revenue jumped nearly 8% from a year ago.

BlackBerry (BBRY) shares were sharply higher this morning after the Canadian smartphone maker raised its outlook for the year after reporting that earnings broke even in the second quarter. However, revenue missed estimates as sales plunged 28% from a year ago. BlackBerry also announced it is getting out of the hardware business and will outsource the production of its handsets as it shifts its attention to software.

AB InBev (BUD) has something to celebrate. The brewer’s $100 billion plus takeover of rival SABMiller has been approved by shareholders of both companies. The deal is expected to be completed by October 10th.

Tempur Sealy (TPX) shares sank in early trading late yesterday the mattress firm cut its revenue and profit outlook for the year as it sees weak sales in the current quarter.

Royal Bank of Scotland’s (RBS) agreed to pay $1.1 billion to a US regulator to settle claims that it sold toxic mortgage-backed securities to credit unions in the run-up to the financial crisis.

This analysis and the trade ideas were given to subscribers at 11am.

Tempur Sealy, $TPX, is the result of the Tempur Pedic buyout of Sealy, and made for a mattress giant. The company gained an activist following and has seen its stock rise. Tonight the company will report earnings after the market close. The crowd sourced estimate in Estimize shows an expected 47 cents per share and revenues of $753.3 million, above the Wall Street crowd.

The price and market action have told an interesting story the past year. After a rise to a top in July it went through a bottoming consolidation in late 2104 and into 2015 that led to a run higher. This peaked short term in mid July at 71.50 before pulling back to the 20 day SMA. Since then the price has reversed higher and is back at the top into earnings.

The momentum indicators are showing strength. The RSI is in the bullish zone, while the MACD is rising toward a cross up. A look at the Bollinger Bands® shows them flat and mildly squeezing. This is often a precursor to a move in the stock.

There is support from prior price history at 69.50 followed by 67.85 and 66.75 before 62. There is no resistance above 71.50 but a target of 76. The average move following the last 6 earnings reports has been 12.08% or about $8.55 at current price levels. The stock also has elevated short interest at 9.3%.

Looking at the August options chain, shows the at-the-money Straddle pricing a $7 move into Expiry, quite a bit smaller than the historical. The implied volatility is slightly elevated at 48% compared to the September options at 36%. Open interest is larger on the Call side and focused at the 70 and 75 Strikes, with minimal open interest in Puts at 65 and 70.

Tempur Sealy, $TPX

Trade Idea 1: Buy the August 70/75 Call Spread for $2.20.

Trade Idea 2: Buy the August 70/75 Call Spread and sell the August 65 Put for $1.00.

Trade Idea 3: Buy the August 70/75 1×2 Call Spread (50 cents) and sell the August 65 Put for a $0.65 credit.

Trade Idea 4: Trade Idea 3: Buy the August 70/75/80 Call Butterfly for $1.40.

Trade Idea 5: Sell the August 65/75 Strangle for a $3.00 credit.

#1 looks for a rise to at least 75. #2 looks for the same move higher but uses leverage to improve return, with risk of owning the stock under 65 at Expiry. #3 looks for a rise and stall at the large open interest at 75 with leverage, and a risk of owning the stock under 65. If it runs past 75 you will need to hedge with stock. #4 looks for the 75 Strike open interest to draw and hold it. #5 is profitable on a close between 62 and 78 at Expiry. I like #3 or #5 best if you have margin to use.

These are the types of analysis and trades given to premium users everyday.  Come join us!

I spent some of my formative years trading financing products.  In the bowels of the banking system, repo, buy sell backs, swaps.  These products were not flashy but they had one thing in common.  They accrued income every day.  We used to joke that we made as much money on the weekend and while sleeping as we did at the desk.  It is not that easy to make money in stocks and options trading though.  But I may have found a way to cash in on sleep.

Tempur Sealy International ($TPX) is the maker of the most recommended mattress according to their website.  Their stock price chart above shows some interesting movement.  Not so much over the November to February period, but that action after the dump down to 49 following their earnings report February 5th.  Since then it has had two steps higher and is back near the November peak.  It is notable as well that this is over the slowly rising 200 day SMA.  

Also worth noting is the relative strength it is exhibiting in the current short pullback.  It has almost lost nothing.  Watch this stock for a break over 57.50 to add to your portfolio or trading book for a ride higher, and come as close as you can to making money while you sleep.

drawing by marcelvaneijk