Stryker Corporation: One Month Update on Previous Calls, New Straddle Initiated

It is a beautiful Monday morning and I am excited about the possibilities that options trading hold this week. I am starting this week’s coverage with another visit to the options of Stryker Corporation (NYSE:SYK).

Stryker Corporation with its market capitalization of 36.72B is a medical technology company. The Company’s products include implants used in joint replacement and trauma surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; neurosurgical, neurovascular and spinal devices; as well as other medical device products used in a variety of medical specialties.

Previous Stryker Coverage

I last wrote about trading the options Stryker Corporation is a post titled “Stryker Corporation is Gearing up for a Striking Breakout”. In that post, I talked about how Stryker has been trading in a range and I explored the possibilities of a breakout or breakdown. I then gave the stock a $95 price target when I recommend buying the SYK Jun 2015 92.500 call (SYK150619C00092500) at an asking price of $3.80.

Within one month of coverage, the shares of Stryker Corporation have soared almost 5.6% from a $93 trading price to set a new 52-week high of $98.25. The options contract that I recommended at an asking price of $3.80 has soared 32.89% to a $5.05 trading price.

The Striking Breakout is Here

SYK Chart

The chart above shows how the shares of Stryker have traded within the last one year. The chart shows the previous range levels as covered in the previous charts and it shows how the stock has eventually broken out above the resistance point.

The shares of Stryker were initially trading in a $78 to $84 range from June through October 2014 before the stock broke out to establish a $90 support. The stock then traded with a $90 to $94 resistance support from December 2014 through March 2015. Interestingly, the last blue arrow shows how the shares of Stryker have recorded a brand new breakout to a $96 trading price.

The main reason behind the breakout recorded in Stryker was the quality of the first quarter (Q1 2015) results that the company posted last week.  Stryker reported earnings of $1.11 per share to beat the consensus of $1.08 per share and to mark a 4.7% year-over-year increase. The company reported revenue of $2.38B in line with the consensus estimate and it marks a 3.2% year-over-year increase.

Going forward, Stryker is optimistic about its prospects with its optimistic guidance and I am impressed with the company’s decision to raise its earnings and sales guidance. The company expects Q2 EPS of $1.15 to $1.20 per share and the company expects FY15 EPS of $4.95 to $5.10. Interestingly, Stryker has a Zacks Number 2 “Buy” rank and a Style Score of “C” on Growth, “C” on Value and “A” on Momentum.

Where is Stryker Headed?

The bullish sentiment on Stryker appears to be tapering out as the stock declined 0.29% to $96.90 last Friday. I think it is smart to clear out of the June $92.50 call since the euphoria of the first quarter earnings release is already dying down.

I recommend a straddle on Stryker until we have a definite feel of how the stock will perform in the second quarter. You should consider buying the SYK Jun 2015 95.000 call (SYK150619C00095000) at an asking price of $3.60 and SYK Jun 2015 95.000 put (SYK150619P00095000) at an asking price of $1.60.

 

— Daily Option Alerts

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