Mastercard, MA, broke out of a consolidation channel is late March only to fall back- quickly. Finding support just under the 50 day Simple Moving Average (SMA), has bounced and is now breaking to new highs into an earnings report in the morning. There is support for more upside price action from a rising and bullish Relative Strength Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that is also rising, and crossed up. A short term upside bias. Support lower comes at 542 and 534, followed by 521.25 and 509. There is no resistance higher but there is a Measured Move higher to 558. The reaction to the last 6 earnings reports has been a move of about 3.13% on average or $17.10 making for an expected range of 530 to 564. The at-the money weekly May3 Straddles suggest a similar $16 move by Expiry Friday with Implied Volatility at 41% above the May at 22%.
- Trade Idea 1: Buy the May3 550 Call for $7.20.
- Trade Idea 2: Buy the May3 550/555 Call Spread for $2.55.
- Trade Idea 3: Sell the May3 530/520 Put Spread for a $1.00 credit.
- Trade Idea 4: Buy the May3 550/555 Call Spread selling the May3 530/520 Put Spread for $1.55.
- Trade Idea 5: Buy the May 550/555 Call Spread selling the May 530/520 Put Spread for $1.25.
- Trade Idea 5: Buy the May 555/560 Call Spread selling the May3/May 520 Put Calendar for free.
We made trade #6 for clients. It requires some margin usage from the short May 520 Put. This is one stock where mini options might help.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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