בס״ד

WIN/WIN: 2926% and 170%… Then We Push Our Blood-Sugar to the Limit! (TWNK, EXPO, AMD)

Posted on January 10, 2022

Back in early December, The Holy One of Israel granted us a 222% win on Hostess Inc. (NASDAQ:TWNK), and it appears He’s re-orchestrated events such that a repeat performance now lies in potentia.

But before we get there, we have two trades to close for wham-doggy profits.

The first is our EXPO affair, whose details can be found HERE.

In brief, we’re short one lot of EXPO shares with a breakeven at $108.10.

And with the shares now trading at $103.56, we’re recommending you take profits.

Repurchase the shares, and you walk with $4.54 on zero outlay.

Adjusted for minimal commissions gives you a tremendous 2926% return in a measly five months.

And that’s just divine.

NEXT!

No Fries – Chips! arrived at your inbox on December 2nd and urged you to sell the AMD February 18th 150/155 CALL spread for a credit of $1.80 and buy the AMD February 18th 150/140 PUT spread for $5.45.  Total debit on the affair was $3.65.

And now…?

With price at $132, we say it’s time to cash in.

How?

We’re selling the long CALL AND closing the PUT spread.

That is, sell the 155 CALL for $2.98, the 150 PUT for $21.55, and buy back the 140 PUT for $14.65.

That puts a total $9.88 in your pocket, and leaves you holding one short AMD February 18th 150 CALL.

That means we’re safe with any rise to $159.88 before expiry – an eventuality we don’t see happening.

But to cover ourselves, we’re setting a STOP buy order for one lot of AMD at $150 through February 18th.

That will cover us against any runaway upside loss.

Stay tuned, as a whipsaw at $150 could cause us a headache.

We’ll be watching…

In the meantime, hold tight to that $988 (if we catch it, it’s a 170% win!).

Today’s trade, as mentioned, is about junk food.

Hostess Brands makes Ding Dongs®, Donettes®, HoHos® and, of course, the iconic, edible petroleum-product known as the Twinkie® (with a shelf-life of 21 years!).

But We Repeat Ourselves…

Fundamentally, TWNK carries –

  • A sugary P/E of 26.20,
  • Pays no Dividend,
  • Has a Price to Book ratio of 1.57, and
  • Is owned by neither institution nor insider (actually, the latter hold a wee 0.39% stake in the company).

Now, does that give you spirit or succor?   Reassurance or relief?

We thought not.

Look at the chart –

Technically, we see –

  1. RSI slapping up against the overbought line on three occasions over the last three months (in green).  Though never ascending decidedly above the 80 line, three attempts show just how excited bulls were in the last quarter.  And we believe that period of ‘enthusiasm’, shall we call it, is now coming to an end.
  2. MACD is now rolling lower, another indication that bulls are losing momentum.
  3. A 60 day rising wedge formation (in red) is a bearish development.  As price cuts below the lower red trendline, we’ll get technical selling aplenty.  That could come as early as TODAY.
  4. Late last week, a bearish engulfing pattern (enlarged, blue) formed at the very top of the move, indicating a very likely reversal in trend.
  5. The next stop down, according to Fibonacci retracement calculations (not seen on chart) is roughly $18.50, though a gap to the $16.20 level also needs filling (in blue).  That latter level is our best-case (but less likely) scenario.

The trade we’re offering is dirt cheap but SPECULATIVE.

We’re labeling it as such because of the time-frame involved.

Take a look –

A Jew and His Money recommends you consider selling the TWNK February 18th 20.00/22.50 CALL spread* for a credit of $0.55 (0.80/0.25) and buying the TWNK February 18th 20 PUT for $0.65.  Total debit on the trade is $0.10.

[*Sell the 20 CALL and buy the 22.50 CALL.]

Rationale: the time frame on the trade is short, admittedly, and that’s why we’re terming it ‘speculative’.

With just 40 days until expiry, we’ll have to see some early action to come away with a blockbuster win.

That said, it shapes up rather well, all things considered –

The total take is theoretically unlimited (actually, $19.90) on just a dime laid out.

Breakeven arrives at $19.90, just 2.2% below the current price.

Max loss is $2.60 (difference between the CALL strikes plus the initial debit).

Our first downside target is in the $18.50 range, which – if it transpires – would deliver us $1.45 on $0.10 spent, a very ample 1350% winning.

But it’s also possible we’ll see a retreat to our secondary target in the $16.20 range, covering the gap at that location (in purple, above) and delivering us a plentiful 3600% score.

Timing is everything.  Should the decline come swift and early and slice through our first price target, we’ll leave it to accumulate.  If it looks ready to bounce, we’ll close.

Consider multiple units of the trade – if you’re believer, AND you can swing a big line.

And may the Host of Heaven be with us!

With kind regards,

Hugh L. O’Haynew

 

Leave a Reply

Your email address will not be published.