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Posts Tagged ‘Volatility’

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

Starbucks (SBUX) is Stepping Higher

Monday, March 22nd, 2021

SBUX received an upgrade and price target increase from Wedbush on Friday. The analyst believes the coffee purveyor will exceed its 2021 earnings-per-share range as it better adapts to the pandemic environment with lower drive-thru wait times. Moreover, the company is positioning for a post-COVID world with an enhanced menu that should leverage its strength in China and the U.S.

Despite the endorsement, the stock dropped more than 1% to log its third straight losing day after hitting an all-time high on Tuesday. But the intermediate-term pattern shows a series of higher highs and lows for the past three months. If this pattern holds, the current decline should find a bottom in the 104-105 area, which is also the site of the 50-day moving average.

SBUX Chart March 2021

SBUX Chart March 2021

If you agree that SBUX’s stairstep uptrend will continue, consider the following trade that relies on the stock remaining above $105 through expiration in four weeks.

Buy to Open SBUX 16Apr21 100 Put (SBUX210416P100)
Sell to Open SBUX 16Apr21 105 Put (SBUX210416P105) for a credit of $1.35 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when SBUX was trading at $106.34. 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 $133.70. This reduces your buying power by $500 and makes your investment $366.30 ($500 – $133.70).  If SBUX closes above $105 on April 16, both options will expire worthless, and your return on the spread would be 37% ($133.70 / $366.30).

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

Happy trading,

Terry

Kohls (KSS) Solid Earnings Keeps Rally Alive

Monday, March 8th, 2021

It wasn’t that long ago that KSS was given up for dead. At the bottom of last year’s plunge in late March, the stock bottomed out below $11. Retail was in trouble. Today, the stock is up five-fold after a blowout earnings report this past week. Earnings more than doubled the analyst estimate. And though revenue declined, the final tally beat estimates as well. And earnings in the year ahead also exceeded analyst expectations.

Despite KSS’s recent performance, the analyst community remains skeptical. While there were several target prices increases, the new prices were not that far from the current price. Moreover, there were no upgrades. Just a third of the covering analysts rate KSS a buy, which is hard to justify given that the stock is up 36% this year alone (SPY is up less than 3%). As analysts eventually warm to the shares, there is plenty of room for future upgrades that could give the stock a boost.

KSS’s chart shows the 20-day moving average as the primary support trendline. In fact, there have been just three daily closes below the 20-day in the past four months. Note that the short strike of our credit spread (red line below) lies below the 20-day, so the stock would have to pierce this support for the spread to move into the money.

KSS Chart March 2021 - Post Earnings Options

KSS Chart March 2021

If you agree KSS’s uptrend will continue, consider the following trade that relies on the stock remaining above $52.50 through expiration in six weeks.

Buy to Open KSS 16Apr21 50 Put (KSS210416P50)
Sell to Open KSS 16Apr21 52.5 Put (KSS210416P52.5) for a credit of $0.85 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when KSS was trading at $55.69. 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 $83.70. This reduces your buying power by $250 and makes your investment $166.30 ($250 – $83.70).  If KSS closes above $52.50 on April 16, both options will expire worthless, and your return on the spread would be 50% ($83.70 / $166.30), or 436% annualized.

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

Happy trading,

Terry

ServiceNow (NOW) Shows a Renewal of Upward Momentum After Breaking to an All-Time High

Monday, February 8th, 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.

ServiceNow pushed upward to a fresh all-time high in the past week. The following two articles outline some of the reasons that are driving the growth – ServiceNow: The Workflow Revolution Is Happening and ServiceNow delivers strong Q4 as it expands wallet share.

Technicals

The monthly candle for NOW in January hinted of a potential pullback but the recent surge to new highs indicates otherwise. The upward trend remains intact for this stock and the expectation is that dips will be bought over the near-term. A rising trendline that dates to May last year held the decline last month where a small consolidation took place showing that buyers are ready to step in on dips. Near-term support is seen at the December high of $566.75.  There is momentum behind the move in the past week which suggest the rally will continue although it would not be surprising to see brief period of sideways trading to work off overbought conditions on the smaller time frames.

NOW Chart February 2021

NOW Chart February 2021

If you agree there’s further upside ahead for NOW, consider this trade which relies on the stock remaining above $590 through the expiration in five weeks.

Buy To Open NOW 12MAR21 587.5 Puts (NOW210312P587.5)
Sell To Open NOW 12MAR21 590 Puts (NOW210312P590) for a credit of $1.38 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when NOW was trading near $590.  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 $136.70. This reduces your buying power by $250 and makes your investment $113.30 ($250 – $136.70).  If NOW closes at any price above $590 on March 12, both options will expire worthless, and your return on the spread would be 121% ($136.70 / $113.30), or 1380% annualized.

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

IBD Underlying Updates February 6, 2021

IBD Underlying Updates February 6, 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

Wedbush Raises Price Target for Microsoft (MSFT) to $270

Monday, February 1st, 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.

Wedbush recently raised their MSFT price target to $270 from $260 and said they see potential for it to reach as high as $300. The following two article discuss the price upgrade and reasons why MSFT appears poised to grow – Microsoft will leap another 20% as cloud-computing strength drives strong earnings, Wedbush says and Microsoft: Still Not Fully Priced, Here’s Why.

Technicals

From a technical perspective, MSFT recently posted a bullish breakout above a horizontal resistance level at $225. This same level had capped rallies three times in the fourth quarter of 2020 and is seen as strong support in the event the stock pulls back further from here. There is also support at $231.15 which marks the late August high.

MSFT Chart February 2021 - Undervalued

MSFT Chart February 2021

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $230 through the expiration in five weeks.

Buy To Open MSFT 05MAR21 225 Puts (MSFT210305P225)
Sell To Open MSFT 05MAR21 230 Puts (MSFT210305P230) for a credit of $1.73 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $232.  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 $171.70. This reduces your buying power by $500 and makes your investment $328.30 ($500 – $171.70).  If MSFT closes at any price above $230 on March 5, both options will expire worthless, and your return on the spread would be 52% ($171.70 / $328.30), or 593% annualized.

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

IBD Underlying Updates January 30, 2021

IBD Underlying Updates January 30, 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

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

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

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.

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