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

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

SE is an online gaming and multimedia entertainment company based in Singapore. The company reported earnings in early March that missed estimates on earnings but beat on revenue on a 72% increase from a year earlier while Q4 bookings more than doubled. The stock initially popped following the day of the report but finished flat. SE was then caught up in the tech pullback that pulled the shares 28% lower in just three weeks.

That’s the bad news. The much better news is that the shares found solid support at their 20-week moving average, a trendline that was the site of a reversal higher almost exactly a year ago. The 20-week has been instrumental in guiding the stock on a monster rally that has produced an 8-fold increase in the past year. The recent correction, while dramatic, appears to be done as the stock has gained 14% off the bottom in just the past four days. In short, the rally remains intact and looks to have legs.

SE Chart March 2021

If you agree that SE’s uptrend will continue, consider the following trade that relies on the stock remaining above $220 through expiration in five weeks.

Buy to Open SE 16Apr21 210 Put (SE210416P210)
Sell to Open SE 16Apr21 220 Put (SE210416P220) for a credit of $3.90 (selling a vertical)

This credit is $0.10 less than the mid-point of the option spread when SE was trading at $235. 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 $388.70. This reduces your buying power by $1,000 and makes your investment $611.30 ($1,000 – $388.70).  If SE closes above $220 on April 16, both options will expire worthless, and your return on the spread would be 63% ($388.70 / $611.30), or 611% annualized.

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

Happy trading,

Terry

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

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

DELL reported quarterly results Thursday after the bell that easily beat expectations on both revenue and earnings. The company shipped more than 50 million PCs in 2020, a record high, taking advantage of the higher demand for home-based activities amid the pandemic. In response, several analysts raised their price targets, ranging up to $101, $20 higher than Friday’s close.

The strong results kept DELL’s stock price headed in the right direction. For the week, the stock ticked slightly higher, which is impressive given the Nasdaq’s 5% plunge. In the intermediate term, the stock has been riding along its rising 20-day moving average since crossing above it more than three months ago. Note that the short strike of our credit spread (red line below) lies below the 20-day and the recent lows near $78, so this dual support would need to break for the spread to move into the money.

DELL Chart March 2021

If you agree DELL’s uptrend will continue, or at least stay above $78, consider the following trade that relies on the stock remaining above $77.50 through expiration in seven weeks.

Buy to Open DELL 16Apr21 75 Put (DELL210416P75)
Sell to Open DELL 16Apr21 77.5 Put (DELL210416P77.5) for a credit of $0.90 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when DELL was trading near $81. 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 $88.70. This reduces your buying power by $250 and makes your investment $161.30 ($250 – $88.70).  If DELL closes above $77.50 on April 16, both options will expire worthless, and your return on the spread would be 55% ($88.70 / $161.30), or 408% annualized.

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

Happy trading,

Terry

TSM is in a sweet spot. It’s one of the few manufacturers of chips amid a worldwide shortage, especially in the automotive industry. TSM is a true manufacturer that provides chips to several semiconductor companies that have turned to outsourcing their production needs.

The stock is already up 25% this year as it rides along the support of its 20-day moving average. In fact, the stock has closed just one day below this trendline since early November. The shares pulled back this week but found support once again at the 20-day on Friday. With strong support and a full production pipeline, TSM seems unstoppable. And we’re entering a bullish position on a pullback.

TSM Chart February 2021

If you agree TSM’s rally will continue, consider the following trade that relies on the stock remaining above $135 through expiration in four weeks.

Buy to Open TSM 19MAR21 130 Put (TSM210319P130)
Sell to Open TSM 19MAR21 135 Put (TSM210319P135) for a credit of $2.00 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when TSM was trading near $137.  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 reduces your buying power by $500 and makes your investment $301.30 ($500 – $198.70).  If TSM closes above $135 on March 19, both options will expire worthless, and your return on the spread would be 66% ($198.70 / $301.30), or 857% annualized.

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

Happy trading,

Terry

Cloudflare (NET), a cloud platform and cybersecurity services company, reported earnings after the bell on Thursday that beat analyst estimates for revenue, earnings and guidance. In response, several analysts raised their price targets to a range between $88 and $105 (the stock closed at $85.95 on Friday).

Despite the positive earnings and target price increases, the stock dropped nearly 6%. But it stayed above its rising 50-day moving average, a trendline that has supported the stock throughout a yearlong rally that has seen the stock more than quadruple. With the positive earnings, price target increases and technical support in place, the rally should continue.

NET Chart February 2021

If you agree NET’s rally will continue, consider the following trade that relies on the stock remaining above $85 through expiration in five weeks.

Buy to Open NET 19MAR21 80 Puts (NET210319P80)
Sell to Open NET 19MAR21 85 Puts (NET210319P85) for a credit of $2.35 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when NET was trading near $86.  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 $233.70. This trade reduces your buying power by $500 and makes your investment $266.30 ($500 – $233.70).  If NET closes above $85 on March 19, both options will expire worthless, and your return on the spread would be 88% ($233.70 / $266.30), or 915% annualized.

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

Happy trading,

Terry

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

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

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

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

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

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

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

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

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

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

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

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