Weekend Trader Series
April 28, 2024
Open Positions Update
- The Bill.com (BILL) July 19, 2024, 65-strike put reaches its time-stop this Monday, April 29. Close the position at a limit price within range of the current market price when you place the order.
The following is this week's recommendation:
Dick's Sporting Goods (DKS)Place a limit order to buy the Dick's Sporting Goods (DKS) July 19, 2024 200-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, April 26, this option was offered at $19.20. DKS closed at $207.12 on Friday, April 26.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, May 20, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Dick’s Sporting Goods (DKS) just crossed above the 65-unit trendline on the hourly chart, which is equivalent to its 10-day moving average. This trendline was supportive in January through March, but was a sell signal during an early-April breach. Given that a mid-April retest has proven to be only a short-term sell signal, we’re recommending a new long position on DKS, on the possibility that the recent reclamation underscores the improving technical backdrop.
The retail stock is above $202, which is double its October low where profit taking could have occurred amid growing broad-market headwinds. This action follows a trough at the equity’s advancing 50-day moving average. What’s more, DKS scored a 15.5% post-earnings bull gap in mid-March, and the shares are still above that pre-earnings close. This mean shorts, who represent 10% of the stock’s total available float, are feeling the pressure, evidenced by short covering in the latest reporting period.
Analysts are still pessimistic, leaving room for an unwinding of sentiment that could add tailwinds. Right now, 15 of 28 covering brokerages rate DKS a “hold” or worse. Options are reasonably priced at the moment, considering the equity’s implied volatility (IV) of 36% is below its 63-day historical volatility (HV) of 38%. There’s potential for IV to drift higher, too, with earnings due in June.
Our recommended July 210 call has a leverage ratio of 6.8, and will double in a 15.1% rise in the underlying equity.
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