Using Trading Central’s “Technical Insight” screener, I screened for U.S equities that have listed options available and have confirmed a bullish classic technical pattern with a possible upward price move of at least 15%.
What we found
Western Digital Corp (WDC: NASDAQ) confirmed a Symmetrical Continuation Triangle with a target price in the range of $81to $83.
The price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend.
A Symmetrical Continuation Triangle (Bullish) shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.
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Trading Central Options Insight
We were interested in the directional bias using Trading Central Technical Views and Options Insight to help us identify any options strategy scenarios using Trading Central’s new Options Insight tool that match with the bullish technical event above.
Trading Central has a bullish preference above the $64.50 pivot level with a target of $78.8 which falls within the June 21 monthly expire expected move according to the TC volatility cone above.
Using the below logic with a focus on limiting risk, Options Insight identified 3 bullish options strategies with the preferred strategy identified as a June 21 expiry 72.50-77.50 Bull Call Spread which indicates a max risk of $184/contract and a max profit of $318/contract with a Probability of Profit of 44% which is higher than the Long $72.50 at the money Call with the same expiration with a 37% POP.
The Bull Call Spread strategy falls within the June 21 expected move according to the volatility cone and Risk/reward chart below:
Options Insight was designed to educate retail stock traders that have never considered trading options, the benefits of options strategies that replicate being long stock with less downside risk and learn the importance of volatility and expected price movement in the strike price selection process.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
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This material is from Trading Central and is being posted with its permission. The views expressed in this material are solely those of the author and/or Trading Central and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Options (with multiple legs)
Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by clicking the link below. Multiple leg strategies, including spreads, will incur multiple transaction costs. "Characteristics and Risks of Standardized Options"
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