|Wednesday, June 2nd, 2021|
|World-wide Semiconductor Company Turns to Climb Higher|
Happy Wonderful Wednesday!
I hope you had a great Memorial Weekend. Thank you to those of you who served our country!
Last week closed which then gives the month of May two positive weeks and two negatives. It is Monday as I type, and the market is closed today for the holiday so I’m not sure how May will end and June will start.
To review past equity candidates, scroll down. Several are also hitting all-time highs!
For today’s Trade of the Day, we will be looking at Advanced Micro Devices, Inc., symbol (AMD). Before analyzing AMD’s chart, let’s take a closer look at the stock and its services.
Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom. It serves original equipment manufacturers, public cloud service providers, original design manufacturers, system integrators, independent distributors, online retailers, and add-in-board manufacturers through its direct sales force, independent distributors, and sales representatives.
Advanced Micro Devices, Inc. was founded in 1969 and is headquartered in Santa Clara, California.
I looked through a lot of charts over the weekend. I zeroed in on AMD because it had a modest pullback and now looks ready to recover and climb to new highs.
On the ADX indicator below the chart, notice how the green +DI line is just now climbing above the red line and the black line may again turn up to show strength. These are all signals of strength with the thought that it may continue to climb.
For those who want more info on ADX, I give more details in the section below, or scroll down to the trade info.
Average Directional Index (ADX) Points to Direction and Strength
ADX is an easy indicator to interpret. The +DI line (green) is bullish and when it is on top, it suggests price is going to head up. When the -DI line (red) is on top, it suggests price is going to drop.
The black line is the strength line and when it heads up, it is telling you strength is moving into the DI line that is on top and in control. When the ADX line has been heading down, the DI line on top has been weakening and is ready for a change.
When the DI lines swap places and cross up and the ADX heads up, it suggests strength is moving into the new DI direction.
ADX signal = Profit Payout
Each candle on the chart represents price movement of a week. As the plus DI heads up and toward the black line and remains above the red line, it suggests there is bullish strength that could continue to grow, especially once the black line starts to turn up. If price continues to move up, the ADX line (black) will turn to head up to imply that strength will continue to support the trade. As long as the ADX is heading up, it means it is supporting the bullish- up direction.
I am looking at its chart and possible trade on Monday, but the pattern should hold. You don’t want to consider entry if the current candle were to drop below the lines drawn on the chart. Think of it as dropping through a floor. If that happened, you would not enter or you would close the trade.
If you are interested in learning more about the ADX strength line, I’d like to suggest you consider getting Inevitable Trend Moves. This book covers in detail how to trade the ADX to jump in during a confirmed strength stage that is as clear as looking at a picture with arrows pointing out direction.
AMD Potential Trade
Advanced Micro Devices (AMD) ended the week on a bullish note. Its pattern should remain intact as long as price keeps rising. Notice the + DI is ready to cross above the -DI. We want the + DI to remain above the -DI (green above the red) to consider a trade. Green line on top is bullish.
Price is likely to rise further and eventually above 85 for entry. Its first target is 85 as the plus DI (green line) moves up and the ADX (black line) rises. Its current uptrend should remain intact, and price should continue to rise, perhaps even higher. We will keep an eye on AMD over the course of the next couple weeks.
I am looking at charts on Monday, so prices are apt to change a little by Wednesday.
The short-term price target for AMD is $85, then 90, perhaps, higher to 95.
To buy shares of AMD today price would be approximately 80.50. If it reaches its near-term target of $85 that would be a rise of $4.50 or 5.5% profit in a short period of time. It you bought eight shares the total cost would be $644, and you would earn $36 total on the eight shares.
This said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise. Let’s take a look.
If you bought one Call option contract covering 100 shares of AMD’s stock with a July 16th expiration date for the $85 strike and premium would be approximately $1.92 today or a total of $192. If price decreased the expected $4.50 to $85 target over the next few weeks, the premium might increase approximately $4.50 to $6.42 per share or $642 on your 100-share contract. This is a gain of $450 on your $192 investment or a 234% gain.
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
The example above is a comparison of an investment of $192 and a $450 gain versus a $644 investment and $36. Big difference.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock and potentially offer greater profits.
If you are having any kind of trouble taking advantage of these trades, I don’t want you to miss out. I have put together programs that help traders just like you access the potential profits that options provide. I write like we are having a conversation, so the information is easy to understand and apply. Be sure to check out the programs shared in this email and we will make it easy for you to get your share.
I love to trade, and I love to teach. It is my thing.
PS-I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups are a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves. If you are interested in learning how to apply these tools and increase the potential of each trade, click here to learn more.
Review of Past Candidates:
Eight weeks ago, we looked at First Solar (FSLR). It got off to a slow start and has been down 3 weeks and is up the last 2 weeks a little. It is below its 100 strike and has until June 18th. It will have to have big moves to make it.
Seven weeks ago, we studied Lowes (LOW). It rose to 215 well above its 210 target. It has been down the last three weeks. It rose as high a 194.82 last week.
Six weeks, we covered Target (TGT). It is up this week to 228.84 well above 220 target. The premium when it was listed was 4.75 and it more than doubled. Awesome trade and it has until June 18th.
Five weeks ago, we looked at Silver ETF (SLV). It is at 25.90 and two weeks ago went as high as 26.39. It is above its 25 target and has until June before it expires.
Four weeks ago, we checked out Disney (DIS)- it is up this week after being down. It’s at 178.65 and went as high as 180.14 with a target of 190 and has until June.
Three weeks ago, we examined MO. It started flat- three weeks at the 49.02 area. It has a 52.50 strike with a June 18th expiration date.
Two weeks ago, we looked at IWM, thinking it and the market as a whole may have dropped and slipped into a correction. IWM dropped as low as 214 with a 210 target and then climbed back up to the area above the line. It was a quick small trade and now looks as if it has recovered and is moving up.
Last week, we studied Facebook (FB). Last week, it climbed as high as $333.78 and closed at $328.73. It has a target of 345 with a July 16th expiration.