Red Hat Inc. (RHT) is a provider of open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, middleware, storage and cloud technologies. The stock is currently trading around $78.22 at the upper end of its 52 week range of $52.16-$79.35. The stock has been outperforming the market this year rallying 13.28% year to date. RHT is scheduled to report earnings after the closing bell today, and the stock is fairly flat moving down only $0.09 or 0.12% on the session ahead of the close.

Over the past 12 quarters RHT has rallied on earnings day 6 times with an average move of 7.32%. The stock appears bullish on a chart going into the release having traded above the Ichimoku Cloud for the past few months on the daily bars. Over the past 12 quarters RHT has rallied from earnings to the nearest options expiration 5 times with an average move of 8.11%. The stock looks as if it could reverse its trend and rip to the upside further in today’s session. Investors are mainly looking to see if the recent gain of market share will raise revenue. Linux servers are well positioned to compete with Microsoft’s Windows servers and leads investors to expect long term growth. They have also sacrificed service revenue to increase subscription revenue again targeting earnings in the long-run but may hurt earnings in the next couple of quarters.

The options market is currently implying a move of around $5.65 or 7.2% in RHT by this Friday’s close giving us targets of $83.87 and $72.57.

Andrew Keene

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