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Archive for April, 2021

Danaher (DHR) Earnings Bring Record High

Monday, April 26th, 2021

DHR – a medical diagnostics and research company – reported earnings Thursday morning that blew away estimates. Adjusted earnings came in at $2.52 per share compared with 81 cents a year earlier and the analyst estimate of $1.76. Revenue soared 58% from a year earlier, easily surpassing expectations. The company was bolstered by strength in its core business and by products related to Covid-19 vaccinations, therapeutics and diagnostics. Analysts were clearly impressed, as the company received a slew of target price increases ranging from $270 to $315 (the stock closed Friday at $260).

The earnings news caused DHR to pop more than 6% in two days to hit record highs both days. More importantly, however, this strength propelled the shares above stubborn resistance at the $248 level. This area defined tops in November, January, February and in the week before earnings. With clear sailing ahead and strong fundamentals at its back, DHR should stay above the trading range that dominated its price action for the past six months.

DHR Chart April 2021

DHR Chart April 2021

If you agree that DHR is ready for a new uptrend, consider the following trade that relies on the stock remaining above $250 through expiration in eight weeks.

Buy to Open DHR 18Jun21 240 Put (DHR210618P240)
Sell to Open DHR 18Jun21 250 Put (DHR210618P250) for a credit of $2.00 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when DHR was trading at $260. 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 $198.70. This trade reduces your buying power by $1,000 and makes your net investment $801.30 ($1000 – $198.70).  If DHR closes above $250 on June 18, both options will expire worthless and your return on the spread would be 25% ($198.70 / $801.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Cruising for Profits with Carnival (CCL)

Monday, April 19th, 2021

Few industries were hit as hard during the pandemic as cruise lines. But, after bottoming out more than a year ago, CCL has more than tripled in value.  And although its latest earnings report showed the company absorbing a loss, booking volumes were 90% higher than the previous quarter. That, along with accelerating vaccinations and anticipation of strong demand this summer, brought a slew of analyst target price increases.

The shares have pulled back from their 2021 high following earnings, unable to break through triple-top resistance in the 30-31 area. The retreat has nearly reached the ascending 50-day moving average, which sits at the 27 level. The 50-day provided support to previous pullbacks in February and March. With the fundamentals turning favorable, look for support to hold to keep the uptrend intact.

CCL Chart April 2021 - Tripple Value

CCL Chart April 2021

If you agree that CCL will continue its uptrend, consider the following trade that relies on the stock remaining above $26 through expiration in six weeks.

Buy to Open CCL 28May21 24 Put (CCL210528P24)
Sell to Open CCL 28May21 26 Put (CCL210528P26) for a credit of $0.65 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when CCL was trading at $27. 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 $66.70. This trade reduces your buying power by $200 and makes your net investment $133.30 ($200 – $66.70).  If CCL closes above $26 on May 28, both options will expire worthless and your return on the spread would be 50% ($67.70 / $133.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Gaga for Google … er, Alphabet (GOOGL)

Monday, April 12th, 2021

After popping 7% following its last earnings report in early February, GOOGL traded sideways through the end of March. April has been another story, however, as the stock has gained 10% in just six trading days to hit an all-time high. Over the longer term, GOOGL has been a beast, having more than doubled off the March 2020 low. And why not, given its dominant position in the search and online advertising space.

The recent price action follows a pattern GOOGL has exhibited following recent earnings reports – a quick pop after earnings followed by a trading range or a slight drift higher. The company reports earnings on April 27, so a repeat of recent history bodes well for the stock’s intermediate-term outlook.

GOOGL Chart April 2021

GOOGL Chart April 2021

If you agree that GOOGL will continue its uptrend through earnings on April 27, consider the following trade that relies on the stock remaining above $2200 through expiration in six weeks.

Buy to Open GOOGL 21May21 2190 Put (GOOGL210521P2190)
Sell to Open GOOGL 21May21 2200 Put (GOOGL210521P2200) for a credit of $3.50 (selling a vertical)

This credit is $0.10 less than the mid-point of the option spread when GOOGL was trading at $2270. 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 $348.70. This trade reduces your buying power by $1000 and makes your net investment $651.30 ($1000 – $348.70).  If GOOGL closes above $2200 on May 21, both options will expire worthless and your return on the spread would be 54% ($348.70 / $651.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Adobe (ADBE) Accelerates Uptrend

Monday, April 5th, 2021

On March 23, ADBE reported earnings that easily beat estimates on both revenue and profits. Moreover, the company raised earnings and revenue guidance for the fiscal year. In response, several analysts raised their price targets. Despite the positive news, the stock price was sluggish in the two days following the report. Perhaps that was a response to the 10% rally that began two weeks before earnings.

After those two days, however, the stock resumed its winning ways, gaining ground in four of the next five days. In the process, ADBE crossed above its 50-day and 200-day moving averages. In addition, the 50-day is rolling over into an uptrend for the first time since late October. The stock is now on a 15% rally off the March 8 bottom with no areas of resistance until the 505 level, the site of highs in November, December and January. That leaves room for another 5% of upside.

ADBE Chart April 2021

ADBE Chart April 2021

If you agree that ADBE will stay above its 50-day and 200-day moving averages, consider the following trade that relies on the stock remaining above $475 through expiration in seven weeks.

Buy to Open ADBE 21May21 470 Put (ADBE210521P470)
Sell to Open ADBE 21May21 475 Put (ADBE210521P475) for a credit of $1.90 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading above $483. 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 $188.70. This trade reduces your buying power by $500 and makes your investment $311.30 ($500 – $188.70).  If ADBE closes above $475 on May 21, both options will expire worthless and your return on the spread would be 61% ($188.70 / $311.30).

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $188.70. This trade reduces your buying power by $500 and makes your investment $311.30 ($500 – $188.70).  If DRI closes above $145 on May 21, both options will expire worthless and your return on the spread would be 61% ($188.70 / $311.30).

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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