Buffalo Wild Wings (NASDAQ:BWLD) has been pulling back from a double top at 167 since their last report at the end of July. The latest bounce off of falling trend support though looks good for more upside, if earnings allow. The Relative Strength Index (RSI) is over the mid line and making a 3 month high as it approaches the bullish zone while the MACD has crossed up and is rising. The Measured Move higher suggest this leg can go to at least 139 and there is resistance near there as well as the 50 day SMA and upper Bollinger Band®. Above that 142.50 and 148.50 may give resistance before 151 and the gap to fill to 164.22. There is support lower at 133 and 128.80 before 122.80. The reaction to the last 6 earnings reports has been a move of about 7.93% on average or 10.70 making for an expected range of 124 to 146. The at-the money November Straddles suggest a larger 13 move by Expiry with Implied Volatility at 45% in line with the December at 40%. Short interest is high at just under 12%. Open interest is big at the 125 Strike on the Put side and could draw price there if it disappoints but a positive response sees a cluster centered on the 140 Strike. There were buyers of Call Spreads early.
Trade Idea 1: Buy the November 135/140 Call Spread for 2.50.
Trade Idea 2: Buy the November 135/140-145 1×2 Call Spread for free.
Trade Idea 3: Buy the November 135/145/155 Call Butterfly for 2.50.
Trade Idea 4: Buy the November 135/140 Call Spread and sell the November 125 Put for free.
#1 is straight directional Spread with a possible 2:1 return. #2 is a split strike Call Spread that uses margin and profits from 135 to 150, while #3 profits from 137.50 to 152.50 at expiry. #4 uses margin and has risk below 125 and gives a 5 payout anywhere over 140.
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