Here's the Skinny on Nautilus Group as the Holiday Feasting Begins

We are getting close to the time of the year when people really start stressing about the holidays. And they start eating. Leftover Halloween candy. Big Thanksgiving dinners. Turkey sandwiches for leftovers. Holiday dinners. New Year's Eve drinking. Office parties. Let the debauchery begin for many. With that will come the post Jan. 1 resolutions. That means getting in shape.

In the past, I might have looked at gyms, but with COVID still lurking, I'll turn my attention to at home fitness. Nautilus Group (NLS)  has been a beaten down name in the space, but has shown signs of life the past two weeks. Shares appear to have bottomed around the week of Oct. 11. After a short climb, we saw a rocket higher two weeks ago. After that move, the company filed a $100 million shelf offering, which caused the stock to pause.

That pullback from the shelf offering has been absorbed into the market. We see a rounded bottom around $10 per share with the stock back above the 50-day simple moving average (SMA). It's been quite some time since shares have hung around the 50-day SMA let alone above it.

We're seeing the same type of consolidation in the secondary indicators as we have in price. The Full Stochastics and moving average convergence divergence indicators have both dropped from overbought levels back to around the midline support area and both are turning higher again in a bullish crossover. We don't have the parabolic stop-and-reverse (PSAR) working in our favor yet, so that is one strike. NLS also reports on the Nov. 9, so the clock is ticking. I would prefer a close over $10.75 to get fully invested but I am willing to take a flyer here.

The trade:

Buy to open Dec. $17 $10 calls at $1.40

Net cost: $140

Max risk: $140

Max reward: Unlimited

Breakeven: $11.40

Intrinsic value: $53

Days until expiration: 46

At the time of publication, Tim Collins was long NLS.