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Archive for January, 2021

Buy the Dip in Taiwan Semiconductor (TSM)

Monday, January 25th, 2021

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.

TSM’s solid fundamentals and positive technical outlook makes it an attractive stock to buy on dips. Take a look at what the following two articles have to say about the company’s growth prospects – Taiwan Semi Is Betting $28 Billion on Rising Demand for Chips and Taiwan Semiconductor Manufacturing: Our Top Technology Pick For 2021 Is At The Heart Of The Next Wave Of Technology.

Technicals

If you zoom out to a larger timeframe like a weekly or monthly chart, it’s pretty much been a straight line up for TSM. The stock has posted a 47% gain over the last three months and has advanced 124% from a year ago. Dips have been shallow during this time which means the current 5% decline from recent highs could be a buying oppurtunity. Support is in play from the lower line of a rising trend channel that has contained price action since late December. There is also a horizontal level near the bottom of the channel at $128.50 to create a support confluence.

TSM Chart January 2021 - Straight up trend

TSM Chart January 2021

If you agree there’s further upside ahead for TSM, consider this trade which relies on the stock remaining above $129 through the expiration in five weeks.

Buy To Open TSM 26FEB21 126 Puts (TSM210226P126)
Sell To Open TSM 26FEB21 129 Puts (TSM210226P129) for a credit of $1.45 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when TSM was trading near $129.  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 $143.70. This reduces your buying power by $300 and makes your investment $156.30 ($300 – $143.70).  If TSM closes at any price above $129 on February 26, both options will expire worthless, and your return on the spread would be 92% ($143.70 / $156.30), or 1049% annualized.

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

IBD Underlying Updates January 23, 2021

IBD Underlying Updates January 23, 2021

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

Will Logitech (LOGI) Continue to Post Steady Gains?

Monday, January 18th, 2021

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.

LOGI has rallied 230% from its lows last year and several analysts expect the upward move will continue, here are two of them – Logitech (LOGI) Reports Next Week: Wall Street Expects Earnings Growth and 5 Computer Stocks to Buy That Aren’t Apple or Microsoft.

Technicals

A steady uptrend has been taking place since November. During this time, the stock has been trading within a rising channel and shallow dips have been bought. With LOGI pulling back towards channel support, there could be a good buying oppurtunity around current levels. The 20-Day moving average also comes in to play near the lower bound of the trend channel to create a confluence of support.

LOGI Chart January 2021 - steady gains

LOGI Chart January 2021

If you agree there’s further upside ahead for LOGI, consider this trade which relies on the stock remaining above $100 through the expiration in five weeks.

Buy To Open LOGI 19FEB21 95 Puts (LOGI210219P95)
Sell To Open LOGI 19FEB21 100 Puts (LOGI210219P100) for a credit of $2.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when LOGI was trading near $101.  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 LOGI closes at any price above $100 on February 19, both options will expire worthless, and your return on the spread would be 70% ($206.70 / $293.30), or 798% annualized.

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

IBD Underlying Updates January 16, 2021

IBD Underlying Updates January 16, 2021

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

Thermo Fisher (TMO) Shows Renewed Upward Momentum

Monday, January 11th, 2021

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.

TMO shows signs it has reverted to an uptrend and with a strong fundamental outlook, the stock could see a continuation higher. The following two articles provide more details on the fundamentals of the company  –  Why the Earnings Surprise Streak Could Continue for Thermo Fisher and Is Thermo Fisher Scientific Inc.’s Latest Stock Performance Being Led By Its Strong Fundamentals?

Technicals

The appeal to TMO from the technical side of things is the resurgence of upward momentum since the start of the new year, TMO has broken higher from a flag pattern that had contained it for most of December and it has rallied above a horizontal level near $482. A small dip can’t be ruled out over the short term but the price action seems to suggest that TMO is ready to resume the prior uptrend with an aim for a new all-time high.

TMO Chart January 2021 - Renewed uptrend

TMO Chart January 2021

If you agree there’s further upside ahead for TMO, consider this trade which relies on the stock remaining above $510 through the expiration in five weeks.

Buy To Open TMO 19FEB21 500 Puts (TMO210219P500)
Sell To Open TMO 19FEB21 510 Puts (TMO210219P510) for a credit of $3.78 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when TMO was trading near $512.  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 $376.70. This reduces your buying power by $1000 and makes your investment $623.30 ($1000 – $376.70).  If TMO closes at any price above $510 on February 19, both options will expire worthless, and your return on the spread would be 60% ($376.70 / $623.30), or 684% annualized.

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

IBD Underlying Updates January 9, 2021

IBD Underlying Updates January 9, 2021

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

Marvell Tech (MRVL) – An Outperformer Among Its Peers

Monday, January 4th, 2021

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.

MRVL gained 79% last year compared to a smaller rise of 51% in the SOXX Semiconductor ETF. The following two articles discuss why MRVL could continue to see more upside – These 3 Chip Stocks Have Room to Grow, Say Top Analysts and Top-Rated Stocks: Marvell Technology’s Technical Ratings Rise.

Technicals

After a recent break to an all-time high MRVL has been consolidating within a range for two weeks. Strong support is seen to the downside near $45.60 as this level acted as resistance back in November. There is also a rising trendline near the same price point as well as the 20-day moving average. With strong support to the downside, it might only be a matter of time before MRVL makes another run for new highs.

MRVL Chart January 2021 - Rising

MRVL Chart January 2021

If you agree there’s further upside ahead for MRVL, consider this trade which relies on the stock remaining above $47.50 through the expiration in five weeks.

Buy To Open MRVL 5FEB21 45 Puts (MRVL21025P45)
Sell To Open MRVL 5FEB21 47.5 Puts (MRVL21025P47.5) for a credit of $1.00 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MRVL was trading near $47.50.  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 $98.70. This reduces your buying power by $250 and makes your investment $151.30 ($250 – $98.70).  If MRVL closes at any price above $47.50 on February 5, both options will expire worthless, and your return on the spread would be 65% ($98.70 / $151.30), or 741% annualized.

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

IBD Underlying Updates January 2, 2021

IBD Underlying Updates January 2, 2021

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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