from the desk of Dr. Terry F Allen

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PayPal (PYPL) Is Set To Resume Its Bullish Trend

Recent headlines are suggesting that now might be a good time to get into PYPL, take a look at what these two analysts are saying about the stock – Why I Just Bought PayPal Stock and PayPal’s Momentum Is Spreading Across the World.

Technicals

There are several recent developments that signal PayPal’s stock may have resumed within its broader bullish trend. For starters, the stock has regained its 50-day moving average. This is an indicator that PYPL traded below for much of the correction that started in July. There is a horizontal level near the moving average that is currently creating a nice support confluence. This level falls near $104 and originates from a low posted in late May. Perhaps the strongest signal is that the stock is bouncing from the 50-week moving average, this is an indicator the stock has not traded below on a sustained basis for at least 5 years. Further, a bullish reversal candlestick has printed on both a weekly and monthly chart.

PYPL Chart November 2019 vertical options spread

PYPL Chart November 2019

If you agree there’s further upside ahead for PYPL, 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 PYPL 06DEC19 102 Puts (PYPL191206P102)
Sell To Open PYPL 06DEC19 105 Puts (PYPL191206P105) for a credit of $1.13 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PYPL was trading near $105.  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 $111.70 and your broker would charge a $300 maintenance fee, making your investment $188.30 ($300 – $111.70).  If PYPL closes at any price above $105 on December 06, both options would expire worthless, and your return on the spread would be 59% (673% annualized).

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

IBD Underlying Updates November 2, 2019 options strategy

IBD Underlying Updates November 2, 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

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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