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The Tide Appears to Be Turning For LogMeIn

I view LOGM as an attractive speculative long play.
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Cloud-communications company LogMeIn (LOGM)  hasn't enjoyed the recent surge in cloud mania like many newer sector related stocks. The company initially known for providing remote customer support and secure device access transformed itself last year to a remote meeting provider after completing a merger with GoToMeeting, previously held by Citrix (CTXS) .

Last quarter, the company posted results slightly above expectations in terms of both revenue and earnings per shares, but guidance for next quarter and the full year fell short of expectations in terms of earnings. Revenue, on the other hand, is expected to handily beat next quarter as well as for the full year. Investors did not react well, but the tide appears to be turning.

LOGM shares are pushing above both resistance as well as the 50 day simple-moving average this morning morning. We've already seen a new high in the Commodity Channel Index (bullish divergence) as well as a strong push in the Chaikan Money Flow on a longer-term view. There's enough cloud mayhem along with a technical setup for me to view LOGM as an attractive speculative long play.

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The trade:

Buy to open July $110-120 call spread at $3.95

Net Cost $395

Max Risk $395

Breakeven $113.35

Intrinsic Value $220

Days until expiration 30

This trade only has one month remaining, but the time value is slightly offset for the next week or so here by using a spread. The delta is close to .50, so I expect a lot of movement here. The spread should be moving at almost fifty-cents on the dollar of the underlying stock. A close under $108 puts this one in grave danger, so that is where I'd consider a stop. More conservative traders may want to wait for a close OVER the 50-day SMA before entering this trade. I do believe that is the way to approach this with non-speculative dollars. I prefer the idea of splitting with an entry of half size now and filling the position on a close over the 50-day SMA in the next week.

At the time of publication, Timothy Collins had no position in the securities mentioned.