This was another option trade that I established using the Gartley Harmonic indicator of the Trade Scanner System.
I've noted down in my trading calendar that US gourmet restaurant operator Buffalo Wild Wings Inc. (BWLD) would be reporting earnings on 29/4/13 after market close.
I've taken a snap shot of the stock chart on 19/4/13 from Chart Trade Scanner when I could access it. You will realize that by then, the stock price has already surpassed the 200% Fibonacci level.
I determined that BWLD had to perform remarkably well in its upcoming earnings announcement if the stock price was to keep going up past this level. On the other hand, if BWLD reported marginal earnings figures, the stock price might be brought down to a more down-to-earth valuation price level.
Thus, I took the opportunity to sell a 90/95 bear call credit spread for a credit of $290 per contract on 18/4/13 just before the earnings announcement occurred after the US trading hours.
Though shares of Buffalo Wild Wings (BWLD) shot up more than 4% in Monday's (29/4/13) after-hours trading following a strong quarterly report from the company, the stock fell into a tailspin Tuesday (30/4/13) morning after a pair of analyst downgrades stemmed investors' excitement.
While Deutsche Bank raised BWLD price target from USD95 to USD105 from $95 per share, the US market drove shares of B-Wild down more than 4% after analysts at both Sterne Agee and KeyBanc downgraded the stock to "neutral" from "buy." In fact, the price of BWLD went down USD4 on 30/4/13 to end at around USD90.
I bought back the 90/95 bear call credit spread for USD168 for a profit of around USD120 (excluding commissions).
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Yours Truly,
Tony Chai
ETP Batch #8
