Jabil (JBL) Set to Fly Like a Magpie
by Houghton and Atkeson 09/30/08
On Sept. 26, Jabil Circuit (JBL) reported essentially an in-line quarter with slightly weaker guidance. After a very short-term bounce, the stock dropped with the market back to its March 27 low which may be a double-bottom.
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The company's LCD TV business has been a huge drag on earnings performance. Some analysts believe there is a possibility the company could sell its LCD TV business which would serve as a positive catalyst.
Today, option investors are buying more than 11,000 JBL Dec 12.50 Calls (JBLKV). With earnings behind the company, a double-bottom holding for now and almost 40% upside to the option strike price, this option action warrants some consideration.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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