Earnings analysis on both NFLX & AAPL

Earnings analysis on both NFLX & AAPL 

Hello Real Life Traders, stock market fans and investors all over the world. I trust you are doing most splendidly!

Earnings season is here and as a day trader and options enthusiast, I am a big fan on trading NFLX and AAPL and I've got my eyes on them pretty much daily. Since both will be the talk of the town, here's my analysis and plans on both.

Today is a big day because the earnings report is out on NFLX. If you're a fundamental fan of NFLX, you might enjoy some of these numbers I gleaned from Yahoo Finance.

NFLX 'added just 160,000 domestic subscribers in the second quarter, which fell far short of the already reduced guidance of 500,000 additions.” Also 'NFLX added only 1.5 million international subscribers, compared with guidance of 2 million.”

These are still huge numbers folks. NFLX is still growing, just not as rapidly as management wants. Their revenue of $1.2 billion was inline with guidance, while earnings per share of $0.09 beat expectations, but guidance on earnings per share for the coming quarter was seen as disappointing, at $0.05 versus $0.08.”

NFLX is putting a lot more time, money and assets into their original shows - but their recurring monthly revenue model is still a very solid one that will stand the test of time, especially with their quality of content.

This article will be focusing on the open after its earnings.

As I write, NFLX is down about 14% post market. My recent interactive chart shows the levels I was interested in.

So, what now? Well, my thoughts are simple. If NFLX opens below a key support level of $84.81, I'll be pretty hesitant on the bullish bounce. It could happen, of course, but I'll wait a few hours or days before I pull any triggers. If NFLX can open above $85, it has hope of a bounce. $84.81 was the 'Brexit low', but it did have a low of $79.95 back in Feb which would still be a solid support. The 100 SMA on a weekly is at $87.04

An open above that and I really like NFLX chances to continue higher; much higher into 2016. NFLX is quality, people.

The plan: If it opens in my bullish zone, I plan on buying some Aug or Sep (depending on their pricing) $95 calls. One could also plan on buying shares down here or selling some puts. The first four to five mins of this gap likely will be crucial. Regardless of how much selling it gets, I would still like to own NFLX down here and will look for a place to purchase. My dollar cost average at this point would be down significantly after about 13 or 14 successful put sales in a row.

An open in my bearish zone, I'll keep an eye out for the bearish day trade, might play it bearish into $80 where I will still look to play it bullish.

Traders, I'm really excited to see what happens. This one on NFLX will be wild!

Now, let's take a stab at AAPL.

AAPL's earnings always generate a huge discussion and affect boatloads of people. I think the season of wild 15-20% gaps on earnings for AAPL are over and calmed down. Now that AAPL has made it to the 'dividend paying' portion of stocks, it's going to be seen as more of a blue chip stock now and its estimates will be much more stable, likely.

We can see this with some declined option implied volatility and thus the pricing and value of the options over earnings.

Here are my thoughts on AAPL over earnings. This will be purely a shorter term (weeks to months) perspective based on the technical charts of AAPL. Earnings are the 26th of July after market close. My guess? I think AAPL gaps up on earnings and then trades down. But of course, it's AAPL. It could have an amazing earnings report and gap down.

If AAPL does gap down, I'll be interested to see the magnitude and thus the size of the gap down.

If the gap down is small, I would be excited about a small gap down and open between $98 and $96. You'll see a small green triangle on my chart. A gap down in that range would likely represent a retest of the triangle and AAPL should pop and run bullish a few days after the gap.

A large gap down into the $92 range will be really interesting. I mean, how many times can AAPL bounce strongly off of that support? $93.30 is the 200 simple moving average on the weekly, which is also a strong support. Will AAPL bounce again, if it gaps down that far? Maybe. That's what I'll be interested to play (the bounce) with either some put sales or calls.

Regarding those who might have shares of AAPL, I really like a $105 Aug week 1 covered call, bringing in about $0.45 cents per 100 shares. The 200 SMA on the daily is $104.12. My thought is if AAPL gaps up again, in that 6-7% range, those who bought off of $92 will likely sell that gap and it will fade and trade back down to $100, where I expect to play the bullish bounce off of $100.

That's where the 100 simple moving average is right now. How fitting - right at $100.14, which was an amazing resistance on 7/18/16. Between now and earnings, if AAPL trades sideways a few days and then creates a small 'normal gap up' above $100.83, I think AAPL could run up into earnings. And then, it's anybody's guess. The $107 - $105 level is a brick wall of lower highs on AAPL's weekly chart.

It kind of appears AAPL could be forming a double bottom on the weekly, too. That's why I anticipate a wait after a gap up for a possible trade down, at which point I'll be a buyer. Either way, I love AAPL long term. I would love to hear your thoughts on either of the above stocks. Feel free leave a comment below and tell me your trading plan or email me at jerremy@reallifetrading.com if you have any questions!

Thanks so much for reading and until next time, remember, Love Life, live life and trade it!

Jerremy Alexander Newsome

C.E.O. and guy with the fluffiest hair at Real Life Trading