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Archive for November, 2020

Will Amazon (AMZN) Break Higher Into the Year-End?

Monday, November 30th, 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.

AMZN is up 74% in the year thus far and looks poised to continue the uptrend. The following two articles highlight some of the reasons investors may continue to push the stock price higher –  Cramer’s Year-End Game Plan: Load Up On Digital Retailers and Wall Street Analysts Say These 5 Stocks Are A Buy As The World Prepares For The Post-COVID-19 Era.

Technicals

AMZN has been consolidating sideways within a triangle since the start of September. These types of consolidations often end with an upward break when they are preceded by a strong bullish trend. On a monthly chart, the stock is set to print a bullish reversal candlestick pattern which hints that the uptrend might be restarting. Lastly, as mentioned in one of the articles above, seasonality patterns show that AMZN typically performs well in this part of the year.

AMZN Chart November 2020 - Year end upwards break

AMZN Chart November 2020

If you agree there’s further upside ahead for AMZN, consider this trade which relies on the stock remaining above $3195 through the expiry in six weeks.

Buy To Open AMZN 8JAN21 3190 Puts (AMZN210108P3190)
Sell To Open AMZN 8JAN21 3195 Puts (AMZN210108P3195) for a credit of $2.55 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when AMZN was trading near $3195.  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 $253.70. This reduces your buying power by $500 and makes your investment $246.30 ($500 – $253.70).  If AMZN closes at any price above $3195 on January 8, both options will expire worthless, and your return on the spread would be 103% ($253.70 / $246.30), or 964% annualized.

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

IBD Underlying Updates November 28, 2020

IBD Underlying Updates November 28, 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

Palo Alto Networks (PANW) Soars Following Earnings Beat

Monday, November 23rd, 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.

PANW rallied to fresh all-time highs after first-quarter earnings and revenue surpassed analyst expectations. In addition to the earnings report, Palo Alto Networks is acquiring a cybersecurity company that stands to boost its competitive edge. The following two articles provide more detail – BofA Turns Bullish On Palo Alto Networks After Q1 Beat and Palo Alto Networks: Why Expanse Is A Game Changer.

Technicals

Monday’s earnings report offered the catalyst for a bullish break of a flag pattern that had been forming for several months. The technical break signals a bullish continuation of the trend that took place in the second and third quarter. PANW has shown a steady rise in upward momentum since the start of the month and investors may look to continue buying on shallow dips.

PANW Chart November 2020 - All time high

PANW Chart November 2020

If you agree there’s further upside ahead for PANW, consider this trade which relies on the stock remaining above the $290 level through the expiration in six weeks.

Buy To Open PANW 31DEC20 285 Puts (PANW201231P285)
Sell To Open PANW 31DEC20 290 Puts (PANW201231P290) for a credit of $2.05 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when PANW was trading near $292.  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 $203.70. This reduces your buying power by $500 and makes your investment $296.30 ($500 – $203.70).  If PANW closes at any price above $290 on December 31, both options will expire worthless, and your return on the spread would be 69% ($203.70 / $296.30), or 646% annualized.

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

IBD Underlying Updates November 21, 2020

IBD Underlying Updates November 21, 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

Paypal (PYPL) – A Longstanding Favorite Among Analysts

Monday, November 16th, 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.

A majority of analysts have consistently given PYPL a Strong Buy rating over the past year, and rightfully so. The stock is up 74% YTD even though it’s down about 13% from the all-time high posted last month. The following two articles shed some light on why investors are drawn to the company: Robinhood Investors Love PayPal. Should They? and Is PayPal Stock A Buy Right Now? Here’s What Earnings, Charts Show.

Technicals

PYPL has mostly traded sideways for the last four months which is not that surprising as stocks often fall into a period of consolidation after a powerful rally. The 100-Day moving average has come into play and while there have been a few days where PYPL traded below it, buyers have been quick to lift the stock back above it. With PYPL trading close to the lower bound of the recent range, this could be an attractive price point to consider a long position.

PYPL Chart November 2020 - Strong Buy

PYPL Chart November 2020

If you agree there’s further upside ahead for PYPL, consider this trade which relies on the stock remaining above the $185 level through the expiration in five weeks.

Buy To Open PYPL 18DEC20 180 Puts (PYPL201218P180)
Sell To Open PYPL 18DEC20 185 Puts (PYPL201218P185) for a credit of $1.83 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when PYPL was trading near $189.  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 $181.70. This reduces your buying power by $500 and makes your investment $318.30 ($500 – $181.70).  If PYPL closes at any price above $185 on December 18, both options will expire worthless, and your return on the spread would be 57% ($181.70 / $318.30), or 650% annualized.

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

IBD Underlying Updates November 14, 2020

IBD Underlying Updates November 14, 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

Investors Flock to Facebook (FB) Post-Election

Monday, November 9th, 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.

Facebook rose sharply higher in the past week for a gain of 11.5%. The following two articles discuss the rationale behind the move and its implications – 3 Stocks That Are Big Winners After The U.S. Election and Best Mutual Funds Buy Up FANG Stocks Amazon, Alphabet, Facebook.

Technicals

The price action points to the same narrative as suggested by the articles mentioned above. There was a large move lower ahead of the election, likely attributed to investors covering their position ahead of the election. But then the rally in the past week catapulted FB to a new 2-month high, signaling a clear shift in sentiment from the earlier uncertainty. Further, FB’s outperformance compared to the broader markets during this time shows that it remains a favorite among investors. Near-term support is seen at $284 as the price point acted as resistance last month. The strong show of buying as of late suggests that near-term dips will be shallow, but if FB dips below $284, further support is seen at the 50-Day moving average. This moving average falls near a rising trendline that originates from a low printed in late June.

FB Chart November 2020 - Post election spike FANG

FB Chart November 2020

If you agree there’s further upside ahead for FB, consider this trade which relies on the stock remaining above the $292.5 level through the expiration in five weeks.

Buy To Open FB 11DEC20 290 Puts (FB201211P290)
Sell To Open FB 11DEC20 292.5 Puts (FB201211P292.5) for a credit of $1.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when FB was trading near $293.  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 $106.70. This reduces your buying power by $250 and makes your investment $143.30 ($250 – $106.70).  If FB closes at any price above $292.5 on December 11, both options will expire worthless, and your return on the spread would be 74% ($106.70 / $143.30), or 844% annualized.

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

IBD Underlying Updates November 7, 2020

IBD Underlying Updates November 7, 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

Franco Nevada (FNV) – Is it Time to Start Looking at Gold Stocks Again?

Monday, November 2nd, 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.

Back in August, gold-related stocks were in the headlines as many of them were surging with spot gold prices rallying to an all-time high. Often when a certain sector is getting a lot of attention, it’s worthwhile waiting for a pullback which is why it may be worthwhile revisiting FNV which has retreated 16% from its August high. The following article outlines why FNV’s upcoming earnings report could drive its stock price higher – Franco-Nevada (FNV) Earnings Expected to Grow: What to Know Ahead of Next Week’s Release. Also take a look at this article which discusses FNV’s advantage over its competitors as a result of its unique business model – Franco Nevada Corp (FNV) Has Risen 45% in Last One Year, Outperforms Market.

Technicals

FNV tested its 200-day moving average and the candlestick pattern that has materialized since then signals that a bullish reversal could take place. Looking at the broader picture, while FNV has declined notably from its August high there hasn’t been a lot of momentum in the downward move, especially over the past two months. A triangle pattern has emerged and a break of the upper line of the pattern, roughly around $140, would offer confirmation of a bullish breakout.

FNV Chart November 2020 - Gold Stocks

FNV Chart November 2020

If you agree there’s further upside ahead for FNV, consider this trade which relies on the stock remaining above the $135 level through the expiration in seven weeks.

Buy To Open FNV 18DEC20 130 Puts (FNV201218P130)
Sell To Open FNV 18DEC20 135 Puts (FNV201218P135) for a credit of $2.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when FNV was trading near $136.50.  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 $206.70. This reduces your buying power by $500 and makes your investment $293.30 ($500 – $206.70).  If FNV closes at any price above $135 on December 18, both options will expire worthless, and your return on the spread would be 70% ($206.70 / $293.30), or 544% annualized.

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

IBD Underlying Updates October 31, 2020

IBD Underlying Updates October 31, 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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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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