Attractive Setup for Biopharma Trade

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Enbridge, Inc., noting that ENB shares have been making a series of new 52-Week Highs.

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

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

AstraZeneca plc, is one of the largest biopharmaceutical companies in the world. AstraZeneca’s business can be broken down into separate lines based on therapeutic classes. These include cardiovascular, respiratory, immunology, oncology, rare diseases and other.

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

Below is a 10-Month Simple Moving Average chart for AstraZeneca plc.

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

This crossover indicated the buying pressure for AZN 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 AZN is 85.25 per share.

111.0% Profit Potential for AZN Option

Now, since AZN’s 1-Month Price is trading above the 10-Month SMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an AZN 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 AZN 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 AZN option example, we used the 1% Rule to select the AZN 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.

See how Chuck looks to earn an average of $126 in cash payouts per week. His focus on leveraging time is now yours to learn.

Trade with Higher Accuracy

When you use the 1% Rule to select an AZN in-the-money option strike price, AZN stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if AZN stock is flat at 82.52 at option expiration, it will only result in a 6.9% loss for the AZN option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for AZN on 8/12/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if AZN stock increases 5.0% at option expiration to 86.65 (circled), the call option would make 52.1% before commission.

If AZN stock increases 10.0% at option expiration to 90.77 (circled), the call option would make 111.0% before commission and outperform the stock return more than 11 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 profit opportunities 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.

Check out Chuck’s PRO Trading Service!

I don’t want you to miss a single opportunity to potentially reach your goals. That’s why I want to share this video I made about my PRO Trading Service.

I want you to follow in my footsteps for the opportunity to succeed beyond your wildest dreams, so please call my office at (737) 292-4425 and get started today!

Wishing You the Best in Investing Success,