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Archive for September, 2020

Intuit (INTU) Chart Signals Buying Opportunity

Monday, September 28th, 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.

INTU looks appealing from both a technical and fundamental perspective. The following two articles discuss why investors might be drawn to the stock from the fundamental side of things – Here is Why Growth Investors Should Buy Intuit (INTU) Now and Here’s Why I Think Intuit Is An Interesting Stock.

Technicals

On the technical side, INTU trades near an important confluence of support, and recent price action suggests that buyers are willing to defend it. Support for INTU comes from its 100-day moving average as well as a horizontal level at $305. This price point previously acted as resistance back in February when the markets broadly turned lower. Further, on the larger time frames, INTU tested its 20-week moving average in the past week. There was a strong rally from the indicator which has led to a bullish reversal candlestick formation on a weekly chart.

INTU Chart September 2020 - strong rally

INTU Chart September 2020

If you agree there’s further upside ahead for INTU, consider this trade which relies on the stock remaining above $317.50 through the expiration in five weeks.

Buy To Open INTU 30OCT20 315 Puts (INTU201030P315)
Sell To Open INTU 30OCT20 317.5 Puts (INTU201030P317.5) for a credit of $1.03 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when INTU was trading near $318.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $101.70. This reduces your buying power by $250 and makes your investment $148.30 ($250 – $101.70).  If INTU closes at any price above $317.50 on October 30, both options will expire worthless, and your return on the spread would be 69% ($101.70 / $148.30), or 787% annualized.

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

IBD Underlying Updates September 26, 2020

IBD Underlying Updates September 26, 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

Horizon Therapeutics (HZNP) Has More Than Doubled in 2020

Monday, September 21st, 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.

HZNP has gained 120% YTD and several analysts expect it will continue to march higher. Check out the following two reports for several reasons why the company is likely to remain in demand – 5 Reasons to Invest in Horizon Therapeutics Amid Coronavirus and Hedge Funds Never Been This Bullish On Horizon Therapeutics (HZNP).

Technicals

When stocks are in a strong bullish trend, there are often periods of consolidation that are followed by a continuation higher. HZNP shows exactly this pattern as the stock consolidated in a sideways range for six weeks before finally breaking higher in the past week. The same $76 price point that previously acted as resistance has acted as support following the bullish range breakout which is also a positive sign. In the event the stock dips below $76, there is strong support from a rising trendline that has been in play for nearly six months.

HZNP Chart September 2020

HZNP Chart September 2020

If you agree there’s further upside ahead for HZNP, consider this trade which relies on the stock remaining above $80 through the expiration on October 16.

Buy To Open HZNP 16OCT20 75 Puts (HZNP201016P75)
Sell To Open HZNP 16OCT20 80 Puts (HZNP201016P80) for a credit of $2.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when HZNP was trading near $80.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $211.70. This reduces your buying power by $500 and makes your investment $288.30 ($500 – $211.70).  If HZNP closes at any price above $80 on October 16, both options will expire worthless, and your return on the spread would be 73% ($211.70 / $288.30), or 1066% annualized.

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

Dollar General (DG) Looks Set to Continue the Steady Rise

Monday, September 14th, 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 good things to say about DG, here are two of them – 2 Top Stocks to Buy in September and Hedge Funds Keep Buying Dollar General Corp.

Technicals

DG has been trading within a rising trend channel for just over four months. The 50-day moving average is currently near the lower boundary of the channel to offer a confluence of support. A test of this support zone in the past week resulted in a move higher which shows that buyers are willing to defend this area. In addition to the steady trend, DG has outperformed most of the stocks on the IBD Top 50 list over the past few weeks.

DG Chart September 2020 - Rising Trend

DG Chart September 2020

If you agree there’s further upside ahead for DG, consider this trade which relies on the stock remaining above $200 through the expiration on October 16.

Buy To Open DG 16OCT20 195 Puts (DG201016P195)
Sell To Open DG 16OCT20 200 Puts (DG201016P200) for a credit of $1.98 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when DG was trading near $200.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $196.70. This reduces your buying power by $500 and makes your investment $303.30 ($500 – $196.70).  If DG closes at any price above $200 on October 16, both options will expire worthless, and your return on the spread would be 65% ($196.70 / $303.30), or 741% annualized.

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

IBD Underlying Updates September 12, 2020

IBD Underlying Updates September 12, 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

Microsoft (MSFT) – Recent Tech Sell-Off Offers a Buying Opportunity

Monday, September 7th, 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 offer compelling reasons why MSFT could move higher. The first is an analyst upgrade with a price target of $240 – Microsoft Stock (MSFT) Gets Price Target Increase To $240 From Mizuho. The second article outlines MSFT’s competitive advantages –  2 Tech Stocks That Are Thriving Despite the Coronavirus.

Technicals

We offered a trade idea in MSFT at the start of August and the option spread used in the idea expired for a 74% profit on Friday. Because of the decline over the past few days, the stock is once again testing the same trendline that made the trade attractive last time around. The 50-day moving average is also in play and this is an indicator the stock has not closed below in over four months. Friday’s candlestick formation signals buying activity and that the support confluence is being defended, at least so far.

MSFT Chart September 2020

MSFT Chart September 2020

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $212.50 through expiration on October 9.

Buy To Open MSFT 09OCT20 210 Puts (MSFT201009P210)
Sell To Open MSFT 09OCT20 212.5 Puts (MSFT201009P212.5) for a credit of $1.20 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $214.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $118.70. This reduces your buying power by $250 and makes your investment $131.30 ($250 – $118.70).  If MSFT closes at any price above $212.50 on October 9, both options will expire worthless, and your return on the spread would be 90% ($118.70 / $131.30), or 1027% annualized.

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

IBD Underlying Updates September 5, 2020

IBD Underlying Updates September 5, 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