Will Walgreen Co. (WAG) Continue its Bearish Earnings Trend?

Walgreen Co. (WAG) is a Deerfield, IL based operator of over 8,200 nationwide brick-and mortar Walgreen’s drug stores that provide retail goods, pharmacy and health-and-wellness services. At the time of this post, (12:00PM CST) WAG is currently trading at 73.74, up 0.70% on the day. The stock is currently well within the upper portion of its 52 week trading range of 55.27-76.39, and is set to report earnings before the open tomorrow, 12/23/2014.

Over the last eight quarters of earnings data available, WAG has traded mostly bearishly, moving lower five out of eight sessions immediately following the EPS release. The average historical move during this same time period was 2.9%. Currently the options market is pricing in an implied move of approximately 2.64% or $1.95 in the underlying stock by this Friday’s 12/26/2014 weekly expiration, which would be well within the expected historical range. WAG is currently trading under 75.00 resistance on the daily chart after this level held firmly twice in early and mid June and rejected the uptrend again last week. Perhaps most worrisome is that the stock was unable to break through and trade above this level despite massive broad-market strength last week that saw most individual stocks ripping higher. As WAG has demonstrated an inability to trade higher despite favorable market conditions, I am currently leaning bearish this name and will look to establish a short position going into earnings tomorrow.

Trade: Buying the WAG Dec 26th Weekly 72.5-71.5 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $72.20