Philip Morris Is Set to Be a Huge Performer in the Coming Days

Philip Morris fell after a July 19 negative earnings report. The price drop was excessive, so expect a turnaround in coming sessions.
By Michael Thomsett ,

Philip Morris (PM) - Get Reportreported earnings on July 19 before the open. A negative earnings surprise drove the price down more than 3% to close at $99.89. Revenue was reported at $6.65 billion versus analysts' expectations of $6.79 billion. Earnings missed as well, reported at $1.15 per share versus consensus of $1.21. 

However, the price drop could be an exaggeration. Strong bullish reversals appeared on the chart. 

The dotted line shows the bullish trend underway, confirmed by the ascending triangle (a confirmation signal) that began at the start of June. However, the strongest signal was the hammer that appeared on earnings day after the large gap in price. 

This set of developments points to a likely recovery in price in the short term. With this in mind, look at the August 5 weekly options, expiring in 16 days. The 100 call closed on July 19 at an ask of 1.20. With trading costs, a single contract will cost about $129. The breakeven on this trade is $101.29 (strike of 100 plus cost of the option of 1.29). This is only 1.40 points above the 7/19 closing price.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Michael Thomsett blogs atTheStreet.com,Seeking Alpha, and several other sites. He has been trading options for 35 years. He also teaches on the Candlestick Forum website. To check membership, go to Candlestick Forum membership. His new book can be viewed at tinyurl.com/z44kzlu

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