Buy Jabil Calls as Firm Rebounds

With the start of next earnings season just three weeks away, there is a surprisingly robust lineup of earnings plays this week for options trading investors. Tech has a strong presence with the likes of Adobe (NASDAQ: ADBE ), Red Hat (NYSE: RHT ), Oracle (NASDAQ: ORCL ), Research In Motion (NASDAQ: RIMM ), and our pick today — Jabil Circuit (NYSE: JBL ). JBL operates in the printed circuit board space, which was rocked last week when Sanmina-SCI (NASDAQ: SANM ) warned that second-quarter earnings (due in late April) would fall short due to a variety of reasons including a potential slowdown in the tech market. JBL fell on the news but found solid support at its 100-day moving average. Jabil Circuit (NYSE: JBL) JBL reports on Tuesday after the close, with analysts expecting a robust 75% increase in per-share earnings from a year ago. That may sound high, but it would represent the lowest growth of the past five quarters. What's more, JBL hasn't missed an estimate in two years and has gained an average of more than 6% in the week following the past three reports. Sentiment is largely positive toward JBL, but it should be for a stock that is up 90% in the past seven months. Options players are showing some hesitation of late, as the put/call ratio has been on the rise for the past month and now stands at a four-month high. So we might see some unwinding in the options pits that could add buying pressure. With a record of beating earnings, relatively modest growth expectations, strong chart support, and recent negative news priced into the shares, JBL is set up for post-earnings upside. With plenty of time until April expiration, we recommend buying the front-month JBL April 19 Call for less than $1.50 to take advantage of the expected move. Money-Doubling Options Trades from Earnings Hits & Misses Learn how to cut through the rumor and manipulation surrounding corporate earnings announcements and bank money-doubling option trades all year long. Download our FREE trading guide here .
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