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Archive for July, 2020

Can Chegg (CHGG) Continue the Upward Rally?

Monday, July 27th, 2020

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.

The following two articles outline several reasons why Chegg (CHGG) could see some more upside: Does Chegg (NYSE:CHGG) Have The Makings Of A Multi-Bagger? and Chegg (CHGG) Upgraded to Strong Buy: Here’s What You Should Know

Technicals

From a technical perspective, CHGG is seen dipping lower to test support from a rising trend channel that has encompassed price action since the middle of last month. Further support is seen just below the trend channel at the $70 price point. What’s most appealing is that the stock has been outperforming the broader markets in recent times and has held ground while other stocks have eased back. A minor hurdle is seen near $75. If the stock is able to clear it, the odds for a new record high appear favorable.

CHGG Chart July 2020

CHGG Chart July 2020

If you agree there’s further upside ahead for CHGG, 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 CHGG 21AUG20 65 Puts (CHGG200821P65)
Sell To Open CHGG 21AUG20 70 Puts (CHGG200821P70) for a credit of $1.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CHGG was trading near $73.  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 $1.30 per spread.  Each contract would then yield $166.70 and your broker would charge a $500 maintenance fee, making your investment $333.30 ($500 – $166.70).  If CHGG closes at any price above $70 on August 21, both options would expire worthless, and your return on the spread would be 50% (730% annualized).

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

IBD Underlying Updates July 25, 2020

IBD Underlying Updates July 25, 2020

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

Should You Buy the Dip in Adobe (ADBE)?

Monday, July 20th, 2020

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.

Adobe has been a long-term outperformer and the recent dips could offer an attractive entry point for buyers. Check out what the following two analysts have to say about the stock – Here’s Why Adobe (ADBE) Stock Could be a Solid ‘Buy’ in Today’s Market and Is Adobe Stock A Buy Right Now? Here’s What Earnings, ADBE Chart Show.

Technicals

Adobe has corrected lower in the past week and is seen testing a confluence of support. The support area consists of a horizontal level at $423 that previously acted as support in late June as well as the lower bound of a trend channel that has encompassed price action since April. The earlier downside momentum has already subsided which signals that buyers are defending this area. While above $423, the stock has the potential to continue higher, in line with the trend from the low in March.

ADBE Chart July 2020 buy the dip

ADBE Chart July 2020

If you agree there’s further upside ahead for ADBE, 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 ADBE 21AUG20 425 Puts (ADBE200821P425)
Sell To Open ADBE 21AUG20 430 Puts (ADBE200821P430) for a credit of $2.15 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $432.  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 $1.30 per spread.  Each contract would then yield $213.70 and your broker would charge a $500 maintenance fee, making your investment $286.30 ($500 – $213.70).  If ADBE closes at any price above $430 on August 21, both options would expire worthless, and your return on the spread would be 75% (855% annualized).

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

IBD Underlying Updates July 18, 2020

IBD Underlying Updates July 18, 2020

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

Advanced Micro Devices (AMD) is Poised for a Move to the Upside

Monday, July 13th, 2020

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.

Several analysts expect AMD to continue pushing higher. The following two articles provide offer compelling reasons as to why – Is Advanced Micro Devices Finally Ready to Break Out? and 3 Reasons AMD Stock Is a Buy Right Now.

Technicals

AMD has been consolidating sideways since mid-April and appears poised for an upside breakout. Buyers have been defending the lower end of the range near support at $50 while sellers have capped gains at a trendline that originates from the peak posted in February. Consolidations typically break in the direction of the broader trend and this particular stock has had a strong bullish trend for more than four years. Unlike other stocks that are appealing to investors right now, AMD does not show signs of being overbought on a daily timeframe which reduces the chances of a sharp near-term retracement. In terms of support, the 20 and 50-day moving averages have converged towards each other to offer a floor at $53.50.

AMD Chart July 2020 vertical put spread

AMD Chart July 2020

If you agree there’s further upside ahead for AMD, 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 AMD 14AUG20 50 Puts (AMD200814P50)
Sell To Open AMD 14AUG20 55 Puts (AMD200814P55) for a credit of $2.01 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when AMD was trading near $56.  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 $1.30 per spread.  Each contract would then yield $199.70 and your broker would charge a $500 maintenance fee, making your investment $300.30 ($500 – $199.70).  If AMD closes at any price above $55 on August 14, both options would expire worthless, and your return on the spread would be 67% (764% annualized).

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

IBD Underlying Updates July 11, 2020

IBD Underlying Updates July 11, 2020

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

Kroger (KR) Shows Renewed Upward Momentum Following an Earnings-Inspired Dip

Monday, July 6th, 2020

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.

Several analysts have positive things to say about Kroger, here are two of them – Kroger: How The COVID-19 Crisis Could Provide Long-Term Tailwinds and Are Investors Undervaluing Kroger (KR) Right Now?

Technicals

Kroger corrected lower in June but the decline was shallow which signals underlying strength. Further, the dip that followed their recent earnings report was promptly bought up and the upward momentum has picked up notably since then. Strong support for the stock is seen at $32.70 as the 20 and 50-day moving averages have converged towards each other at that price point. Kroger has not traded below it’s 50-day moving average on a sustained basis for nearly a year as buyers continue to accumulate this stock near that particular indicator. To the upside, the $34.50 price point might be a near-term hurdle as it was in May, but a break above it would clear the path for a retest of the March high near $37.

KR Chart July 2020

KR Chart July 2020

If you agree there’s further upside ahead for KR, 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 KR 7AUG20 30.5 Puts (KR20087P30.5)
Sell To Open KR 7AUG20 33.5 Puts (KR20087P33.5) for a credit of $0.87 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when KR was trading at$33.50.  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 $1.30 per spread.  Each contract would then yield $85.70 and your broker would charge a $300 maintenance fee, making your investment $214.30 ($300 – $85.70).  If KR closes at any price above $33.50 on August 7, both options would expire worthless, and your return on the spread would be 40% (456% annualized).

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

IBD Underlying Updates July 4, 2020

IBD Underlying Updates July 4, 2020

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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Success Stories

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