EOT Trade Alert – February 27, 2015
Trade Alert:
Buy WEN May 15th 2015 $11.00 calls at $0.80 or better
Company Background:
The Wendy’s Company (WEN) owns and franchises Wendy’s restaurant system. There are 6,515 fast food restaurants in their system.
Short-Term Catalyst:
WEN has been going through a restructuring or ‘optimization initiative’ the last few years.
In short, they are getting out of the ownership business. They’re selling the stores that are owned by the company to franchisees.
Their plan is to accelerate growth by focusing their capital on improving the franchise through better technology. And it appears to be working… same-store sales shot up 3% in the fourth quarter.
They have already sold many restaurants that were owned by the company and will continue to do so in the future. Much of the restructuring will be completed by the second quarter of 2015.
As a result of these efforts, many hedge funds are piling into the stock in anticipation of better earnings growth in the future. In fact, the number of hedge funds that own shares of WEN has increased 42% in the last year.
The bullish outlook and increased hedge fund interest has helped lift WEN 26% higher year-to-date. There’s clearly a lot of bullish momentum behind this stock right now.
Right now, WEN is trading above the 20-, 50-, and 200-day moving average. And it should continue to trend higher in the weeks ahead.
Let’s grab call options on WEN to profit from this momentum stock.
Trade Details:
| Underlying Stock Symbol: | WEN |
| Current Bid-Ask Price: | $0.60 – $0.70 |
| Option “Buy Up To” Price: | $0.80 |
| Break-Even On Stock At Expiration: | $11.80 |
| Maximum Risk Per Contract: | $80 |
Exit Strategy:
WEN is trading at $11.10 per share. Resistance levels will be at $12.00 and again at $13.00. Remember, we want this stock to move higher. Support levels will be at $10.20 and $9.50. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.
Chart:
Category: EOT Trade Alert
