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Archive for November, 2018

Should You Buy the Post Earnings Dip in Charles River Laboratories (CRL)?

Sunday, November 25th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Should You Buy the Post Earnings Dip in Charles River Laboratories (CRL)?

Recent price target upgrades suggest more upside for CRL.  Take a look at these two articles that contain the details – Charles River Laboratories PT Raised to $148.00 at Robert W. Baird and Charles River Laboratories Given a $147 Price Target at Royal Bank of Canada.

CRL has been contained within a rising trend channel for just over a year now.  A spike higher following their latest earnings report was met with sellers at the top of the channel, resulting in a dip back to roughly the halfway point.  Support is found at $125 which was where the stock was trading prior to the earnings inspired gap up.  CRL has been outperforming the broader markets as it traded at record highs just a few weeks ago.  The trend remains healthy, technically speaking, on a daily chart and higher time frames and there have not been any technical indications that the uptrend won’t continue.

CRL Chart November 2018

CRL Chart November 2018

*source Tradingview.com

If you agree there’s further upside ahead for CRL, consider this trade which is a bet that the stock will continue to advance over the next four weeks, or at least not decline very much.

Buy To Open CRL 21Dec18 120 Puts (CRL181221P120)
Sell To Open CRL 21Dec18 125 Puts (CRL181221P125) for a credit of $1.53 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CRL was trading near $127.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $150.50 and your broker would charge a $500 maintenance fee, making your investment $349.50 ($500 – $150.50).  If CRL closes at any price above $125 on December 21, both options would expire worthless, and your return on the spread would be 43% (581% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates November 22, 2018

IBD Underlying Updates November 22, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Will Motorola Solutions (MSI) Continue to Outperform?

Sunday, November 18th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Will Motorola Solutions (MSI) Continue to Outperform?

Investors have many reasons to remain bullish Motorola Solutions including a recent dividend hike as well as an upgrade accompanied with a raised price target.  Take a look at the following articles for details – Motorola Rewards Shareholders With 9.6% Dividend Hike and Motorola Solutions Upgraded to Buy by Zacks Investment Research.

The main appeal from a technical perspective is the outperfomance of Motorla stock versus the S&P 500.  This was first seen in late October when MSI bottomed very near to its mid-month low.  Recent price action appears much more obvious as the equity index turned lower on November 8 while MSI managed to hold near highs.  There seems to be a small hurdle near $130, but after several attempts bears have failed to elicit a downturn.  This is especially significant considering that equities were broadly weaker during the period this resistance level was being tested.  Considering the overall trend and the strength displayed as of late, the odds favor an upside break.  The below chart has an overlay of the S&P 500 to illustrate the recent divergence.

MSI Chart November 2018

MSI Chart November 2018

*source Tradingview.com

If you agree there’s further upside ahead for MSI, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MSI 21DEC18 125 Puts (MSI181221P125)
Sell To Open MSI 21DEC18 130 Puts (MSI181221P130) for a credit of $1.84 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSI was trading near $130.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $181.50 and your broker would charge a $500 maintenance fee, making your investment $318.50 ($500 – $181.50).  If MSI closes at any price above $130 on December 21, both options would expire worthless, and your return on the spread would be 57% (650% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates November 15, 2018

IBD Underlying Updates November 15, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Xilinx (XLNX) Surges to Fresh Yearly Highs, What’s Next?

Sunday, November 11th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Xilinx (XLNX) Surges to Fresh Yearly Highs, What’s Next?

Xilinx has been receiving a lot of media attention as of late, these two articles shed some light on what analysts are expecting from the company – What Makes Xilinx a Strong Momentum Stock: Buy Now? And Has Xilinx Outpaced Other Computer and Technology Stocks This Year?

XLNX reversed sharply higher a few weeks back after their earnings report exceeded expectations.  Since then, the stock price regained it’s 20-day moving average, and more importantly, broke to a fresh 18-year high to clearly signal that bulls are in control.  A consolidation has taken place over the past week which is common following an important techincal break and most often precedes a continuation in the direction of the trend.

XLNX Chart November 2018

XLNX Chart November 2018

*source Tradingview.com

If you agree there’s further upside ahead for XLNL, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open XLNL 21DEC18 82.5 Puts (XLNL181221P82.5)
Sell To Open XLNL 21DEC18 85 Puts (XLNL181221P85) for a credit of $1.05 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when XLNL was trading near $86.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $102.50 and your broker would charge a $250 maintenance fee, making your investment $147.50 ($250 – $102.50).  If XLNL closes at any price above $85 on December 21, both options would expire worthless, and your return on the spread would be 69% (681% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates November 8, 2018

IBD Underlying Updates November 8, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Consider Kirkland Lake Gold (KL), A Gold Mining Growth Stock

Sunday, November 4th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Last week was a great one for the market (SPY up 2.6%) and an even better one for the Terry’s Tips 8 actual option portfolios.  Every one made gains, and the composite average picked up 11%, a record we are quite proud of.

Terry

Consider Kirkland Lake Gold (KL), A Gold Mining Growth Stock

The Investor’s Business Daily recently posted an article which started out by stating “Gold might not come to mind first when you think of growth stocks” which is very true.  Take a look at this article for the full write up and the reasoning behind why they see growth potential in this stock.  Also check out Kirkland Lake Gold Receives Consensus Rating of “Buy” from Analysts.

KL corrected lower ahead of earnings and was mostly flat following it.  The technical significance is that the stock managed to hold above a triple confluence of support derived from a rising trendline, the 50-day moving average, as well as a horizontal support level.  Also significant is the prior correction that took place in late summer that was held higher by the 200-day moving average.  These developments suggests that

bulls remain firmly in control from a technical perspective while the close proximity of the current price to support offers an attractive entry point.  It’s worth mentioning that the correlation between this stock and the price of Gold has strengthened since last month and that Gold appears to be carving out a bottom, at least a near-term one.

KL Chart November 2018

KL Chart November 2018

*source Tradingview.com

If you agree there’s further upside ahead for KL, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open KL 21DEC18 17.5 Puts (KL181221P17.5)
Sell To Open KL 21DEC18 20 Puts (KL181221P20) for a credit of $0.78 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when KL was trading near $20.00.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $75.50 and your broker would charge a $250 maintenance fee, making your investment $174.50 ($250 – $75.50).  If KL closes at any price above $20 on December 21, both options would expire worthless, and your return on the spread would be 43% (402% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates November 1, 2018

IBD Underlying Updates November 1, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins