Robust earnings from Netflix Inc. (Nasdaq:NYSE: nflx) breathe new life into the Nasdaq. And it is in the interests of the dynamics of the stock, as GrubHub Inc (Nasdaq:grub)- up to 5% in early morning trading. The launch could not come at a better time, because the food supply was on the verge of breaking its 50-day moving average.
Let’s take a closer look at recent activity and see if there is trade to be had.
On the weekly chart show. Four quarters of the income gap self-propelled grub on the moon. Follow-up was impressive creates greater momentum on each thrust. Even though the stock was taken down a notch or two during the recent market turmoil, the damage is minimal.
In fact, three weeks of the retreat was necessary to work in the extreme conditions of overbought. Perhaps most revealing are body patterns. Instead of seeing a mass Exodus over the last month, on the descent, we saw a garden Variety profit taking with medium volume.
Such benign diseases believe it was the fall to buy them. And buy it.
The daily chart shows how buyers gathered at the 50-day moving average to protect their territory. Support at $95 also was impenetrable, showing the resolve of the Bulls. Today’s rally is the beginning of GrubHub stock above short-term resistance at $101. Continued strength should carry food back to its historic high near $112.
Upcoming earnings on may 1 is the wild card. GrubHub is undoubtedly the engine and a shaker in response to these events, so you better buckle up, if you end up holding in the release.
Delicious grub trade
If you are willing to bet on good times keep rolling, buy in June and $105/115$bull call spread for $3.65. Since your risk is limited to the original cost, the loss will be minimal, if there are spaces at the Bottom to work. The potential prize is $6.35, which provides an attractive 174% return on investment if GrubHub soars on earnings and is sitting above $115 at expiration.
At the time of this writing, Tyler Craig did not occupy positions in any of the above securities. Want more education on how to trade? Check out my trading blog, tales from the technician.