Market Overview

Stocks to Watch for the Week of June 17, 2013

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Michael Fowlkes, InvestorsObserver

FedEx reports fiscal Q4 earnings on June 17
What's happening with FDX:
Shipping giant FedEx (NYSE: FDX) will report its fiscal fourth quarter results before the market opens on June 19. Analysts have forecast earnings of $1.97 per share, down slightly from the $1.99 it earned during the same period last year. The stock sold off sharply following a disappointing third quarter report in March, but has still managed to trade up 6.4% year to date.

Technical analysis: FDX was recently trading at $97.49, down $12.17 from its 12-month high and $13.57 above its 12-month low. Technical indicators for FDX are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $92.00. Of the 20 analysts who cover the stock 14 rate it a "strong buy", one rates it a "buy", four rate it a "hold" and one rates it a "strong buy". The stock receives Standard and Poor's 5 STARS "Strong Buy" ranking.

Analysts' thoughts:After a disappointing third quarter report in March, FedEx is need of strong numbers for its fourth quarter or risks another steep selloff. Its third quarter results suffered from weak international numbers, mainly a result of weakness in international airfreight markets. The company noted that international volumes were strong, but it customers have been opting for less expensive, slower delivery services. FedEx has reported lower year-over-year earnings each of the last three quarters, and most likely will extend that streak for its fourth quarter. With expectations lowered, the stock should be OK as long as it at least reports earnings in-line with estimates, but an earnings miss could result in another sharp selloff.

Stock-only trade: If you're looking to establish a long stock position in FDX, consider buying the stock under $97.50, and sell if it falls below $90 or take profits if it gets to $108.

Option trade: If you are looking for a hedged options trade on FDX, consider a July 82.50/87.50 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (85.8% annualized*) and the stock would have to fall 9.8% to cause a problem.

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $82.50 call. If FDX rises just 5.3% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.

Kroger reports first quarter earnings on June 19
What's happening with KR:
Kroger (NYSE: KR) will report its first quarter results before the market opens on June 19. Analysts have forecast earnings of $0.88 per share, up from $0.78 during the same period last year. The stock has been a strong performer thus far in 2013, gaining 33% year to date.

Technical analysis: KR was recently trading at $34.30, down $1.14 from its 12-month high and $13.32 above its 12-month low. Technical indicators for KR are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $32.00. Of the 13 analysts who cover the stock seven rate it a "strong buy", one rates it a "buy", four rate it a "hold" and one rates it a "sell". The stock receives Standard and Poor's 3 STARS "Hold" ranking.

Analysts' thoughts:Kroger has reported quarterly earnings that were in-line or better than analyst forecasts for each of the last six quarters, and there is little reason to believe this quarter will break that streak. Kroger has faced increased competition from big-box retailers such as Target (NYSE: TGT) and Wal-Mart (NYSE: WMT), and has been taking actions to improve the shopping experience for its customers. The changes appear to be working, with the company reporting a 3% increase in same store sales during its fourth quarter. The company has an impressive record of 37 straight quarters of reporting increased sales in its stores open at least one year. I expect another strong quarterly report from the company, and for it to extend its streak of same store sales increases.

Stock-only trade: If you're looking to establish a long stock position in KR, consider buying the stock under $34, and sell if it falls below $30 or take profits if it gets to $39.

Option trade: If you are looking for a hedged options trade on KR, consider a July 30/32 bull-put credit spread for a 20-cent credit. That's a potential 11.1% return (109.6% annualized*) and the stock would have to fall 6.1% to cause a problem.

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $31 call. If KR rises just 4.4% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.

CarMax reports first quarter earnings June 21
What's happening with KMX:
Auto dealer CarMax (KMX) will report its first quarter results before the market opens on June 21. Analysts have forecast quarterly earnings of $0.57 per share, up from $0.52 during the same period last year. The stock has been a strong performer this year, having traded up 22.2% year-to-date.

Technical analysis: KMX was recently trading at $45.88, down $2.98 from its 12-month high and $21.05 above its 12-month low. Technical indicators for KMX are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $42.00 and resistance under $47. Of the 12 analysts who cover the stock five rate it a "strong buy", three rate it a "buy" and four rate it a "hold". The stock receives Standard and Poor's 3 STARS "Hold" ranking.

Analysts' thoughts:CarMax has been a strong performer over the recent year. The company has reported increases in net income for each of the last three quarters, and higher revenues for four straight quarters. The improved economy is helping both new and used car sales, and there is little reason to believe that CarMax will disappoint with its quarterly numbers. However, should the company miss, there is downside risk to the stock since it is trading with a P/E of slightly over 24.

Stock-only trade: If you're looking to establish a long stock position in KMX, consider buying the stock under $46, and sell if it falls below $41.50 or take profits if it gets to $52.

Option trade: If you are looking for a hedged options trade on KMX, consider a July 37/42 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (109.6% annualized*) and the stock would have to fall 7.4% to cause a problem.

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $43 call. If KMX rises just 6.8% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.

Big Data stocks gain a lot of attention
What's happening with TDC:
With so much attention being paid to the National Security Agency and its spying tactics, Big Data has dominated the headlines in recent weeks. Teradata (NYSE: TDC) has been a poor performer through most of the year, but over recent weeks has traded higher as the interest in Big Data has grown. The stock is down 9.7% year-to-date, but has managed to trade up 14.4% since hitting its 52-week low on May 3.

Technical analysis: TDC was recently trading at $55.86, down $25.11 from its 12-month high and $7.05 above its 12-month low. Technical indicators for TDC are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $50.00 and resistance under $57. Of the 16 analysts who cover the stock eight rate it a "strong buy", two rate it a "buy", five rate it a "hold" and one rates it a "strong sell". The stock receives Standard and Poor's 4 STARS "Buy" ranking.

Analysts' thoughts:We are living in an age of Big Data, and while data collecting and data crunching is nothing new, its importance in today's world has been under the spotlight over the last few weeks. News of the data collecting that has been taking place by the National Security Agency highlights how big of a future lays ahead for Big Data companies. Teradata is a company that you may not be familiar with, but it’s a major player in Big Data. The company provides analytic data solutions to clients around the globe, offering warehouse solutions, software and hardware. TDC is the largest enterprise data warehousing provider in the world. While there are competing services on the rise, the high cost of switching services will help Terdata retain its customers. The future is bright for Teradata, and as corporations increase their budgets on data analytics the company will continue to grow.

Stock-only trade: If you're looking to establish a long stock position in TDC, consider buying the stock under $56, and sell if it falls below $50.50 or take profits if it gets to $62.50.

Option trade: If you are looking for a hedged options trade on TDC, consider a July 45/50 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (85.8% annualized*) and the stock would have to fall 9.8% to cause a problem.

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $50 call. If TDC rises just 4.5% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.

June housing market index released June 17
What's happening with PHM:
With the housing market continuing to improve, 2013 has been a strong year for homebuilders. On June 17, the market will get a clue on the current state of the housing market when the National Association of Realtors releases its housing market index, which is a gauge of housing demand and overall market momentum. PulteGroup (NYSE: PHM) has managed to gain 10.2% year-to-date, but has been in a steep sell off since hitting its 52-week high of $24.47 on May 15. Since that time the stock has lost 18.2% and continues to struggle to find support.

Technical analysis: PHM was recently trading at $20.01, down $4.46 from its 12-month high and $11.65 above its 12-month low. Technical indicators for PHM are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $18.00 and resistance below $24.00. Of the 15 analysts who cover the stock five rate it a "strong buy", one rates it a "buy", eight rate it a "hold", and one rates it a "strong sell". The stock receives Standard and Poor's 2 STARS "Sell" ranking.

Analysts' thoughts:Last month, the housing market index edged higher, indicating improvements in sales conditions, sales expectations and traffic of buyers. The improvements come as potential homebuyers are starting to get the feeling that they need to buy a home while conditions remain so favorable. Interest rates remain low, but are expected to rise soon, and home prices have started to improve across most of the nation. All of the major homebuilders have been strong over the last year, and I expect to see this strength continue through the end of the year as the overall housing market continues to improve.

Stock-only trade: If you're looking to establish a long stock position in PHM, consider buying the stock under $20.50 and sell if the stock drops under $18 or take profits if it gets to $24.

Option trade: If you are looking for a hedged options trade on PHM, consider a July 16/18 bull-put credit spread for a 30-cent credit. That's a potential 17.6% return (174.1% annualized*) and the stock would have to fall 8.5% to cause a problem.

Speculative option-only trade: We do not want to set up an options-only trade at the current time. We believe that the stock has limited downside risk at the current time, but the calls are not priced attractively at the current time to set up a call-only trade.

 

*Annualized returns provided for comparison purposes only

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At the time of writing, Mr. Fowlkes does not have direct ownership in any of the stocks mentioned.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Options Markets Trading Ideas

 

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