What's Happening
Signet Jewelers ( SIG ) is scheduled to report its first-quarter numbers before the market open on June 6. Analysts forecast the company will post a loss of 11 cents per share for the quarter. SIG has struggled in 2018, falling 23.6% year to date.
Technical Analysis
SIG was recently trading at $42.26, down $35.68 from its 12-month high and $9.15 above its 12-month low. Overall technical indicators for SIG are bearish with a possible trend reversal. The stock has recent support above $37.50, and recent resistance below $47.50. All 10 analysts who cover the stock rate it a "hold". SIG gets a score of 43 from InvestorsObserver's Stock Score Report
Analyst's Thoughts
The street has been incredibly bearish on Signet over the last year. The company has a mixed earnings track record, but results did top estimates on both the top and bottom line last quarter. The positive beats did nothing for the stock, with the company issuing bearish guidance that spooked the market and drove shares sharply lower. Tiffany reported much stronger than expected numbers toward the end of May which drove TIF shares sharply higher, and allowed SIG to move slightly higher in sympathy. There is a lot of negativity already priced into the stock, so if the numbers are in-line or slightly better than the $0.11 loss analysts expect, the stock could make a sharp rise, but the report has to show strength. Analysts have an average price target of $39.00 on the stock.
Stock Only Trade
I would not look at a stock-only trade on SIG at this time given the market's overall bearish view on the stock.Bullish Trade
If you want a bullish hedged trade on the stock, consider a July 30/35 bull-put credit spread for a 60-cent credit. That's a potential 13.6% return (101.6% annualized*) and the stock would have to fall 15.7% to cause a problem.
Bearish Trade
If you want to take a bearish stance on the stock at this time, consider a July 55/60 bear-call credit spread for a $0.30 credit. That's a potential 6.4% return (47.6% annualized*) and the stock would have to rise 30.9% to cause a problem.
Covered Call Trade
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a July $40 covered call. Buy SIG shares (typically 100 shares, scale as appropriate), while selling the July $40 call for a debit of $37.50 per share. The trade has a target assigned return of 6.8%, and a target annualized return of 51.5% (for comparison purposes only).The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.