The Next Two Retailers to Get Crushed?
First thing this morning, War Room members were positioned to profit off the big downside move on Urban Outfitters (NASDAQ: URBN) to lock in a 49% winner overnight.
Going into this report, we knew that retail names were making big, big moves – both higher and lower. As traders, we wanted our members to profit off this trend.
Here was the setup…
On Tuesday, names like Home Depot and Kohl’s got hammered when their forecast earnings numbers were lower than expected.
But today, names like Target and Lowe’s blasted higher, beating the estimated earnings numbers.
Seeing these huge reactions – both up and down – we moved into a call-put combo on Urban Outfitters prior to its earnings release.
What attracted us to Urban Outfitters?
Well, as you may or may not know – the company has approximately 2,200 department and specialty stores worldwide under the Urban Outfitters and Anthropologie brands.
If you’ve ever been in one of these stores, then you know that the main attraction is its ’80s and ’90s wear – a lot of which is probably sitting in your parent’s attic right now.
The company caters to the 18 to 28 age group, for a heavily marked-up price.
It’s a fickle market. It’s also a very niche sector. And as such, it’s prone to big price fluctuations. In reaction to its last three earnings reports, Urban Outfitters moved 8%, 1% and 3%. The potential for a big move was setting up.
So we moved in…
War Room members paid a total of $2.65 for a call-put combo. And then, after the close yesterday, Urban Outfitters reported that its earnings came in at $0.56, which was down 20% from the same period last year and just below the Street’s consensus forecast of $0.57.
Revenues fell 1.4% to $987.5 million, which also missed analysts’ forecasts of $1 billion. On this news, shares of Urban Outfitters stock dropped 14% – exactly the move we were looking for!
Thanks to this downside reaction, members sold their call-put combo at $3.95, good for a quick 49% winner.
But some members made even more…
“URBN puts, in at $1.30 out at $3.90!! Thank you BB!!” – Elias
“Out @ $3.25 as 130% gain. Another great call Bryan. Thanks again for helping us profit in a wonderful way.” – Rick R.
Action Plan: With retailers under such an intense microscope right now, it’s clear that investors are either rewarding strong earnings with a big upside move – or punishing weak earnings with a big downside move.
Knowing this, we’ve identified two retailers that could be next in line to make a massive earnings move. One is restaurant Jack in the Box, and it reports earnings after the close today. The other is Macy’s, and it reports earnings before the open tomorrow.
If you want to start turning these big moves into daily profits, you’re invited to join me in The War Room today!
About Bryan Bottarelli
Bryan graduated with a business degree from the highly rated Indiana University Kelley School of Business, and his first job out of college was trading stock options on the floor of the Chicago Board Options Exchange. He was mentored by some of the country’s top floor traders in the heart of the technology boom from 1999 to 2000, where he learned to identify and implement some of his most powerful trading secrets. Now he shares his secrets with a group of elite traders. We will be republishing some of his highly sought after content from his free e-letter, Trade of the Day.