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Archive for December, 2020

Consider Bristol-Myers (BMY) After a Price Upgrade from Goldman Sachs

Monday, December 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.

Goldman Sachs recently upgraded BMY to a ‘Conviction Buy’ and assigned a price target of $86. There have been some other recent upgrades which are discussed in this article – Bristol-Myers Squibb (NYSE:BMY) Upgraded to “Conviction-Buy” by The Goldman Sachs Group. Also check out the following article which outlines why investors may see value in BMY at current prices – 3 Cheap Dividend Stocks For High Total Returns.

Technicals

From a technical perspective, BMY has mostly traded in a broad range after a strong rally in the second quarter. The technicals show that the uptrend remains intact and with a confluence of support nearby, this might be a good time to consider an entry. Support for BMY comes from the lower line of a rising trend channel that started in June. The 200-Day moving average falls near the lower channel line to create a strong area of support for the stock.

BMY Chart December 2020 - Conviction Buy

BMY Chart December 2020

If you agree there’s further upside ahead for BMY, consider this trade which relies on the stock remaining above $61 through the expiration in five weeks.

Buy To Open BMY 29JAN21 58 Puts (BMY210129P58)
Sell To Open BMY 29JAN21 61 Puts (BMY210129P61) for a credit of $1.15 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when BMY was trading near $61.  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 $113.70. This reduces your buying power by $300 and makes your investment $186.30 ($300 – $113.70).  If BMY closes at any price above $61 on January 29, both options will expire worthless, and your return on the spread would be 61% ($113.70 / $186.30), or 696% annualized.

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

IBD Underlying Updates December 26, 2020

IBD Underlying Updates December 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

Advanced Micro Devices Signals More Upside After Breaking to a Record High

Monday, December 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.

AMD has been in a steady uptrend since the start of November and looks set to continue the trend. Check out what the following two articles have to say about the stock – Buying Stocks for Christmas? Put These Tech Stocks Under the Tree and Jim Cramer: Focus on Single Semiconductor Names, Stay Away from ETF Baskets.

Technicals

From a technical standpoint, AMD has confirmed that it has resumed the uptrend by breaking above the September peak. The stock now shows strong support near the September high, around $94. Further support is found slightly below it from a confluence created by the 20-Day moving average and the lower line of a rising trend channel. In addition to the technical chart, AMD has been steadily outperforming the semiconductor index (SOX) and Intel (INTC) for four years.

AMD Chart December 2020 - record breaking momentum

AMD Chart December 2020

If you agree there’s further upside ahead for AMD, consider this trade which relies on the stock remaining above $96 through the expiration in five weeks.

Buy To Open AMD 22JAN21 93 Puts (AMD210122P93)
Sell To Open AMD 22JAN21 96 Puts (AMD210122P96) for a credit of $1.10 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when AMD was trading near $96.  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 $108.70. This reduces your buying power by $300 and makes your investment $191.30 ($300 – $108.70).  If AMD closes at any price above $96 on January 22, both options will expire worthless, and your return on the spread would be 57% ($108.70 / $191.30), or 650% annualized.

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

IBD Underlying Updates December 19, 2020

IBD Underlying Updates December 19, 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

Consider Adobe (ADBE) After the Latest Earnings Report

Monday, December 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.

ADBE has been a regular on the IBD Top 50 list over the past few years and is a favorite among analysts. Check out what the following two reports have to say about it – This Is Adobe’s Must-Hold Support Level if You Buy the Earnings Dip and Adobe (ADBE) Perfectly Positioned for New Highs.

Technicals

Both of the articles linked above discuss a technical outlook for ADBE and for good reason. The stock trades near several moving averages on a daily chart and is also testing support from a rising trendline that originates from a low posted in early November. It’s rare to see such a strong confluence of support lining up in this way and considering the strength this stock has displayed over the years, the odds favor a move to the upside from this point.

ADBE Chart December 2020

ADBE Chart December 2020

If you agree there’s further upside ahead for ADBE, consider this trade which relies on the stock remaining above $475 through the expiration in five weeks.

Buy To Open ADBE 22JAN21 472.5 Puts (ADBE210122P472.5)
Sell To Open ADBE 22JAN21 475 Puts (ADBE210122P475) for a credit of $1.18 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading near $476.  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 $116.70. This reduces your buying power by $250 and makes your investment $133.30 ($250 – $116.70).  If ADBE closes at any price above $475 on January 22, both options will expire worthless, and your return on the spread would be 88% ($116.70 / $133.30), or 1004% annualized.

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

IBD Underlying Updates December 12, 2020

IBD Underlying Updates December 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

Pacira BioSciences (PCRX) Dips After Breaking to Multi-Year Highs

Monday, December 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.

PCRX showed strong upward momentum last month and briefly traded at levels not seen in nearly five years. Several analysts think the stock can continue to gain, the following two articles provide details – IBD 50 Stocks To Watch: This Pharma Stock On 115% Run Eyes Buy Point and $129.57 Million in Sales Expected for Pacira BioSciences, Inc. (NASDAQ:PCRX) This Quarter.

Technicals

The upward move from November has resulted in a bullish candlestick pattern on a monthly chart that suggests dips will be bought over the near-term. The stock has pulled back from its multi-year highs but is seen approaching a strong confluence of support. This comes from an intersection of the 50 and 100-Day moving averages, currently around $58.50.

PCRX Chart December 2020 - Buy the dip

PCRX Chart December 2020

If you agree there’s further upside ahead for PCRX, consider this trade which relies on the stock remaining above the $60 level through the expiration in six weeks.

Buy To Open PCRX 15JAN20 57.5 Puts (PCRX200115P57.5)
Sell To Open PCRX 15JAN20 60 Puts (PCRX200115P60) for a credit of $1.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when PCRX was trading near $61.  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 $111.70. This reduces your buying power by $250 and makes your investment $138.30 ($250 – $111.70).  If PCRX closes at any price above $60 on January 15, both options will expire worthless, and your return on the spread would be 81% ($111.70 / $138.30), or 758% annualized.

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

IBD Underlying Updates December 5, 2020

IBD Underlying Updates December 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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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