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Posts Tagged ‘MRVL’

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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