Yesterday we looked at a monthly chart for LEN, noting the stock was in a strong 10-Month SMA uptrend.
For today’s Trade of the Day we will be looking at a Daily Price chart for Applied Materials, stock symbol: AMAT.
Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.
Now, let’s begin to break down the Daily Price chart for AMAT. Below is a Daily Price Chart with the price line displayed by an OHLC bar.
Buy AMAT Stock
The Daily Price chart above shows that AMAT stock has been hitting new 52-Week Highs regularly since mid-May.
Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.
The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.
After a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.
Our initial price target for AMAT stock is 153.78 per share.
79.3% Profit Potential for AMAT Option
Now, since AMAT has recently been hitting 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an AMAT call option purchase.
The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration, in this example from a flat AMAT price to a 12.5% increase.
The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following AMAT option example, we used the 1% Rule to select the AMAT option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.
The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.
The prices and returns represented above were calculated based on the current stock and option pricing for AMAT on 6/26/2023 before commissions.
For this specific call option, the calculator analysis below reveals if AMAT stock increases 5.0% at option expiration to 146.79 (circled), the call option would make 35.8% before commission.
And if AMAT stock increases 10.0% at option expiration to 153.78 (circled), the call option would make 79.3% before commission and outperform the stock return nearly 8 to 1*.
The leverage provided by call options allows you to maximize potential returns on bullish stocks.
The Hughes Optioneering Team is here to help you identify winning trades just like this one.
Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.
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See what he’s trading and when with his exclusive Inner Circle Trading Service where he will send you his hand-picked stock and option trades.
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Wishing You the Best in Investing Success,
Editor, Trade of the Day
Have any questions? Email us at email@example.com
*Trading incurs risk and some people lose money trading.