Amphenol Ready to Trade Higher?

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Chubb Ltd., noting that CB’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Amphenol Corp. stock symbol: APH.

Before breaking down APH’s monthly chart let’s first review what products and services the company offers.

Amphenol designs, manufactures and markets electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.

Now, let’s begin to break down the monthly chart for APH stock.

Below is a 10-Month Simple Moving Average chart for Amphenol Corp.

Buy APH Stock

As the chart shows, in November, the APH 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for APH stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for APH is 137.02 per share.

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Profit if APH is Up, Down, or Flat

Now, since APH’s 1-Month Price is trading above the 10-Month SMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an APH call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in APH stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for APH on 6/11/2024 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $285 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if APH stock is flat or up at all at expiration the spread will realize a 75.4% return (circled).

And if APH stock decreases 7.5% at option expiration, the option spread would make a 52.2% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 75.4% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

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Wishing You the Best in Investing Success,