Put Selling Against Clorox Stock In 2013 – Is A New Trading Range Starting?

Put Selling is a strategy of earning small profits through continually put selling against stocks, ETFs or other optionable asset classes. Put Selling is my primary investment method and Clorox Stock has been in my Put Selling portfolio for many years. Since December 31 2012, Clorox Stock has moved up by over 9%. On Monday Feb 4 Clorox will announce their earnings for the next quarter. I am holding naked puts at the $80.00 and $77.50 put strikes as well as 5 leap puts for January 2014 at the $70 strike.

Clorox Stock symbol is CLX.

Clorox Stock Earnings Estimates

Average estimates by analysts is for a profit of 81 cents per share which would be a decline of 1.2% from the same quarter last year. Anything below that and the recent rally in the stock may end. However Clorox stock has beaten estimates in each of the last four quarters including last quarter where they earned $1.01 per Clorox Stock share which was up by 6 cents over estimates of 95 cents. I won’t be surprised to see Clorox Stock surprise analysts and their estimates again this quarter.

Clorox Stock Quarterly Revenue

Meanwhile analysts are looking for revenue of 1.27 bullion which would be an increase of 4.1% from last year at this time. If this does occur Clorox will have seen revenue increases in each of the past quarters including 3.6% in the second quarter, 7.4% in the third and 4% in the fourth quarter.

Clorox Stock Technical Indicators

The technical indicators for Clorox Stock are interesting to review. Below is the last couple of months in Clorox Stock. I have marked the key aspects on the chart.

Technical Indicators outlook for Clorox Stock

Technical Indicators outlook for Clorox Stock

A. Momentum in Clorox Stock has remained fairly consistent but it would be nice to see momentum rising rather than remaining even. While nice to see lots of momentum, the recent rise to an all-time high above $79 would have been better on higher momentum. Instead the stock may be on the point of  topping out here and may be a bit overdone as it moved into earnings. The stock could easily sell-off on Monday after earnings are released.

B. From mid-January through to Feb 1 the slow stochastic has shown the stock to be extremely overbought. This has not changed. A stock can only stay this overbought for a short while before it pulls back and consolidates. On Friday the slow stochastic signaled that Clorox Stock will pull back.

C. MACD gave a buy signal on Jan 10 and has not looked back. It continues to point to strength in the present rally.

D. The Ultimate Oscillator is also indicating overbought although in the last rise the level of overbought was lower than the previous two overbought signals which indicates that the last move higher in Clorox Stock may be overdone with limited support and declining Clorox Stock buying.

E. The Fast Stochastic has also been overbought for as long as the slow stochastic and on Friday with Clorox Stock setting a new all-time high the fast stochastic disagreed with the slow stochastic and signaled the stock may move higher.

The analysts who follow Clorox Stock are surprised at the strength the stock has shown. Almost all analysts are showing the stock as a hold. Meanwhile Standards and Poor’s also rates Clorox stock a hold and indicates they believe the stock is fully valued at $73.00. Last week they reiterated their outlook for Clorox Stock indicating that they believe the company can increase sales by 2.4% in 2013 to 5.6 billion from 5.47 billion earned in 2012. Overall most analysts find Clorox stock not compelling for investors.

Clorox Stock Not Compelling

A stock that is not compelling fits in perfectly with my Put Selling strategy. I am expecting to buy to close both the $80 and $77.50 naked puts next week, however the $80 may be more problematic should the stock fall. If it does fall I may roll down with my naked puts although I wonder if Clorox Stock has more potential for higher prices.

I have been put selling against Clorox stock for years primarily by watching the trading ranges and Put Selling within them. The 5 year chart below shows the 4 principal Put Selling ranges I have sold. Each move higher in the stock took almost 12 months for Clorox Stock to establish support and set another new higher range. This latest move by Clorox Stock to new all time highs may be on the verge of establishing a new Put Selling range for my strategy.

Select Clorox Stock 5 year put selling

Put Selling ranges in Clorox Stock over the past 5 years

New Trading Range For Clorox Stock

The question right now is whether Clorox Stock is setting up a new trading range. This is part of the reason why as Clorox Stock climbed throughout January I continued Put Selling from $75 right up to $80. I will not be surprised to see Clorox Stock set up a new trading range between $74 or $73.50 to $77 or $77.50. If this does end up being a new trading range, my present Put Selling will be highly profitable. I will also be Put Selling more strikes in coming months if Clorox stock does prove a new trading range has started. To do that Clorox Stock must retest and hold the $74 valuation levels in the stock.

Clorox Stock Setting A New Trend

Could Clorox Stock be setting up a new trading range?

This is what makes investing exciting and interesting. Watching stocks for new trading opportunities can be highly rewarding especially for investors such as myself who enjoy Put Selling against ranges in stocks. I look forward to the earnings announcement on Monday. After earnings, I will be watching Clorox Stock in February for clues of a new trading range and be ready for Put Selling opportunities if a new trading range does indeed commence.

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