The Play on PAY

It is time for VeriFone Systems (PAY) to step up and prove itself. The company contends that new competitors are nothing more than a blister on the bottom of its feet, making its day on the beach just a bit more uncomfortable. Judging from the last few earnings reports, competition from startups such as Square is weighing on the company more than it would like to acknowledge. Still, the stock has been brought down 22.5% this year, so some of these concerns have been built into the price and the technicals look much better into earnings.

VeriFone Systems (PAY) Source: StockCharts.com View Chart » View in New Window »

This is one I often trade into earnings, and today will be no different. Options are pricing in a move around $3.05, which is close to in line with the technicals. In fact, the technicals point toward a move in the $3.00 to 3.50 area, so the relationship is strong enough to trade. I like the breakout in the RSI, the momentum strength shown in the stochastics and the gap filled on the price. I could see playing the December $33 straddles, especially if I wanted to lean long. My approach, though, will be to buy the December $33-$30 along with the January $33-December $36 diagonal call spread for a total around $2.70. This one leans bullish....115 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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