from the desk of Dr. Terry F Allen

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Copart (CPRT) Eyes $100 Price Point

Copart is a momentum stock that has caught the eyes of many analysts, here are two of them – Why Copart (CPRT) Stock Might be a Great Pick and Why Do 123 A+ Funds Have A Stake In This Breakout IBD 50 Stock?

Technicals

The main appeal to CPRT from a technical perspective is its upward momentum on the larger time frames. Over the last year, the stock has only posted one monthly loss and that loss was a small one compared to typical monthly ranges. Pullbacks have been shallow and buyers are quick to pick this stock up on dips. A horizontal level is in play at $91 that acted as resistance from mid-November until the break higher two weeks ago. The upward break suggests bullish a continuation and the psychological $100 price point may act as a magnet for this stock.

CPRT Chart January 2020

CPRT Chart January 2020

If you agree there’s further upside ahead for CPRT, 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 CPRT 21FEB20 90 Puts (CPRT200221P90)
Sell To Open CPRT 21FEB20 95 Puts (CPRT200221P95) for a credit of $1.63 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CPRT was trading near $95.  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 $161.70 and your broker would charge a $500 maintenance fee, making your investment $338.30 ($500 – $161.70).  If CPRT closes at any price above $95 on February 21, both options would expire worthless, and your return on the spread would be 48% (449% annualized).

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

IBD Underlying Updates January 11, 2020

IBD Underlying Updates January 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

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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