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Will Winnings Never Cease? Four Trades Close for $2000 in Profits! And a Rotting Bouquet from Flowers Foods. (FLO, AMD, AVY, SCI, WSO)

Posted on January 26, 2022

We’re coming at you early this week because a wintry whirlwind is set to descend on the Holy Land, knocking out power and, we hope, not a few nudnicks along the way.

Anyway, Flowers Foods (NYSE:FLO) is our piñata today – Thomasville, Georgia’s thieving bakers of breads, buns, rolls, snack cakes, and tortillas.

The trade is a good one, and lets us participate in FLO’s coming precipitous decline.

But before we get there, we’ve got FOUR lunar-sized profits to pocket.

Commence the Harvest!

To begin, our AMD trade, whose details can be found HERE, has us holding a $9.88 credit and one short AMD February 18th 150 CALL.

We also set a STOP buy order for one lot of AMD at $150 through February 18th.

That we’re now cancelling.

As for the CALL, it can be bought for $0.62, and we’re recommending you execute that purchase with all due speed.

That will leave us with $9.26 NET on just $3.65 spent.

And that’s 153%.

Or 926 US dollars!

Whichever you prefer…

————————————-

Next up is our AVY trade whose details can be accessed HERE.

Basically, we’re in possession of the AVY April 14th 210 synthetic short and a debit of $10.10.

And what do we do…?

Close the synthetic short by buying back the CALL for $6.80 and selling the PUT for $18.20.

That gives us $11.40 total, or NET $1.30 on $6.10 spent.

And that’s a modest 21.3% win.

Third closure on the day is our SCI wager, whose details can be found HERE.

We’re now holding the SCI March 18th 65 synthetic short and a debit of $1.95.

And…

The synthetic short can be closed for $5.35 gross (1.25/6.60), leaving us with exactly $3.40 on nothing laid out!

Adjusted for minimal commissions gives us a total take of 2167%.

And that’s plain butter.

Last up!

Finally, the particulars of our WSO trade can be searched HERE.

To keep it brief, we’re short the WSO February 18th 300 CALL and long the WSO February 18th 290 PUT, and are holding a debit of $3.65.

And now…?

We’re shuttin’ her down.

Buy back the CALL for $5.00 and sell the PUT for $14.50, and you step out with $9.50 gross.

That’s $5.85 NET and a profit of 144%.

And now we Flowerize you.

Commodity cost inflation is what the company is currently battling.  It has raised prices, and that’s helped somewhat, though what will be in coming quarters is unknown.

Inputs continue to rise, and transport costs, too.  The need to expand its marketing budget was also not anticipated, and that put a drag on overall earnings.  Analysts are expecting more of the the same, meaning a very challenging coming quarter for the company.

As the following florid fundamentals attest –

  • The stock has a P/E of 26.87 (remember: bread),
  • Yields a healthy annual posy of 2.99%,
  • Possesses an over-ripe Price to Book ratio of 4.22, BUT
  • Posted an annual EPS DECLINE of 7.60%, and
  • A five year average annual EPS DECLINE of 4.20%.

So where does that leave us?

Corsage in hand.

And alone…

As the chart below will now illustrate –

Technically, we see –

  1. An RSI indicator that twice flirted with overbought before diving toward its waterline (in green).  We’ll plunge below that all-important threshold in the coming days, just as…
  2. MACD begins to roll lower in earnest.  Not good omens.
  3. Price-wise, a 30% gain in four months (in blue) – without any supporting fundamentals – would leave Graham and Dodd aghast.
  4. Highs were set on burgeoning volume (in black), indicating potential distribution.
  5. Support is now found at the rising trendline (in red), currently at $27.50.
  6. Below that, we see next support at the bunched moving averages (boxed, in blue), from which price daringly diverged back in October – and toward which we now believe she’s destined to return.

Hence the following risk-defined mother of a short sale:

A Jew and His Money recommends you consider short selling shares of FLO, currently trading at $28.11, and buying a protective FLO April 14th 30 CALL for $0.65 (one per 100 shares sold).  Total credit on the trade is $27.46.

Rationale: the downside is wide open to us (max gain is a theoretical $27.46).

Max loss is $2.54 (difference between our initial credit and the protective CALL strike).

Our breakeven on the trade is just 2.3% below current price levels.

After which, we start raking it in.

We’re going to aim for closure when we see price approaching the rising 137 DMA.

Unless she slices through that line like a rose throwing star!

May it be His will!

Many happy returns!

Matt McAbby

 

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