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Archive for August, 2019

Visa (V) Dips – Is it Time to Get In?

Monday, August 19th, 2019

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

Visa (V) Dips – Is it Time to Get In?

One analyst recently wrote an article titled Load Up On Visa which is the type of thing usually said when there is a sharp fall in the stock discussed, in the context that it is being offered at a discount. This is certainly not the case with Visa as the correction a few weeks back was much more shallow when compared to other stocks in the sector. The headline goes to show just how positive sentiment is. Also take a look at the following article which discusses Visa’s performance compared to its sector – Is Visa (V) Stock Outpacing Its Business Services Peers This Year?

From a technical perspective, the stock dipped lower in the early month but caught a strong bid near support to erase losses. There is a horizontal level in play at $172 which seems to have been respected by the market. If offered resistance in early June, and support after a gap up later in the month. Earlier this month, the same level held the stock at the open when it gapped lower. The 50-day moving average is also in play, and it is starting to look like the stock has regained it. The overall trend in Visa is impressive and pull backs throughout the rally this year have been shallow. Another sign of strength is how stable the stock was in the past week while the markets were generally volatile and under pressure.

V Chart August 2019 verticle options spread

V Chart August 2019

If you agree there’s further upside ahead for V, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.

Buy To Open V 20SEP19 175 Puts (V190920P175)
Sell To Open V 20SEP19 180 Puts (V190920P180) for a credit of $2.06 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when V was trading near $178.  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 $203.50 and your broker would charge a $500 maintenance fee, making your investment $296.50 ($500 – $203.50).  If V closes at any price above $180 on September 20, both options would expire worthless, and your return on the spread would be 69% (787% annualized).

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

IBD Underlying Updates August 15, 2019

IBD Underlying Updates August 15, 2019

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

Ulta Beauty (ULTA) Looks Poised to Break to Fresh Record Highs

Monday, August 12th, 2019

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

Ulta Beauty (ULTA) Looks Poised to Break to Fresh Record Highs

Several analysts are optimistic regarding Ulta Beauty’s stock price following their recent earnings surprise, here are two of them –  Why the Earnings Surprise Streak Could Continue for Ulta (ULTA) and How one retailer is beating the odds.

From a technical standpoint, ULTA has held above prior support near $330 and bounced higher. In the advance from the level, it has retaken both the 50 and 100-day moving averages. What’s most impressive about ULTA is the longer-run trend as the stock is up more than 40% YTD already. Considering the strong trend, and lack of bearish evidence, the path seems to be to the upside for ULTA with an aim of breaking to new record highs above $370.

ULTA Chart August 2019 Verticle Spread

ULTA Chart August 2019

If you agree there’s further upside ahead for ULTA, 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 ULTA 13Sep19 342.5 Puts (ULTA190913P342.5)
Sell To Open ULTA 13Aug19 345 Puts (ULTA190913P345) for a credit of $1.13 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ULTA was trading near $347.  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 $110.50 and your broker would charge a $250 maintenance fee, making your investment $139.50 ($250 – $110.50).  If ULTA closes at any price above $345 on August 13, both options would expire worthless, and your return on the spread would be 79% (901% annualized).

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

IBD Underlying Updates August 8, 2019 Trade Ideas

IBD Underlying Updates August 8, 2019

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 Essent Group (ESNT) Following Their Earnings Report

Monday, August 5th, 2019

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

Consider Essent Group (ESNT) Following Their Earnings Report

ESNT reported earnings in the past week and despite an early day dip, the stock managed to close higher on the day. The following article provides a view on why the stock could continue higher – 2 Stocks Poised to Thrive in Volatile Times: Essent Group Ltd., Cognex Corporation. Also take a look at this article which discusses the earnings report and the declaration of a new dividend – Essent Group Ltd. Reports Second Quarter 2019 Results & Declares Inaugural Dividend.

There are two significant things going for ESNT from a technical perspective. First, the stock dipped below major support at $45.38 on Friday but managed to close above it. This has resulted in a hammer candle which is a popular candlestick that signals the potential for a reversal. This pattern is not just seen on a daily chart, it is also present on a weekly chart and even on a 4-hour chart. The horizontal level is considered significant as it triggered a major turn last year and as it has acted as support in recent months. The fact that the candlestick pattern printed above such a significant level strengthens it. The other thing going for the stock is that it managed to close higher despite an overall heavy tone in the markets on Friday. This divergence is quite important as the markets look a bit heavy following the price action in the past week.

ESNT Chart August 2019 verticle options spread

ESNT Chart August 2019

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

Buy To Open ESNT 20SEP19 40 Puts (ESNT190920P40)
Sell To Open ESNT 20SEP19 45 Puts (ESNT190920P45) for a credit of $1.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ESNT was trading near $46.  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 $165.50 and your broker would charge a $500 maintenance fee, making your investment $334.50 ($500 – $165.50).  If ESNT closes at any price above $45 on September 20, both options would expire worthless, and your return on the spread would be 49% (389% annualized).

IBD Underlying Updates August 1, 2019 via Terry's Tips

IBD Underlying Updates August 1, 2019

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

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.

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