Yesterday, we looked at a Daily Price Chart for Vermillion Energy Inc. noting that the stock has been making a series of higher highs and higher lows.
For today’s Trade of the Day e-letter we will be looking at a daily price chart for Huntington Ingalls Industries Inc. stock symbol: HII.
Before breaking down HII’s daily chart let’s first review what products and services the company offers.
Huntington Ingalls Industries, Inc. engages in designing, building, overhauling, and repairing military ships in the United States. It operates through three segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Technical Solutions. The company is involved in the design and construction of non-nuclear ships comprising amphibious assault ships; expeditionary warfare ships; surface combatants; and national security cutters for the U.S. Navy and U.S. Coast Guard.
Now, let’s begin to break down the Daily Price chart for HII stock.
Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for HII.
50-Day EMA and 100-Day EMA ‘Buy’ Signal
The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.
- 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
- 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal
When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.
Buy HII Stock
As the chart shows, on March 4th, the HII 50-Day EMA, crossed above the 100-Day EMA.
This crossover indicated the buying pressure for HII stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.
Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.
As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.
Our initial price target for HII stock is 252.00 per share.
105.1% Profit Potential for HII Option
Now, since HII’s 50-Day EMA is trading above the 100-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a HII 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 HII 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 HII option example, we used the 1% Rule to select the HII 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.
Trade with Higher Accuracy
When you use the 1% Rule to select a HII in-the-money option strike price, HII 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 HII stock is flat at 241.58 at option expiration, it will only result in a 3.2% loss for the HII 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 HII on 8/25/2022 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 HII stock increases 5.0% at option expiration to 253.66 (circled), the call option would make 50.9% before commission.
If HII stock increases 10.0% at option expiration to 265.74 (circled), the call option would make 105.1% before commission and outperform the stock return more than 10 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.
Average Portfolio Return of 298.3%
Below is a screenshot of the current open trade profit opportunities from Chuck’s Inner Circle Trading Service. There are currently $223,850.33 in open trade profit opportunities with an average portfolio return of 298.3% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios**.
**Open trade profit results represent the open trade profit performance for the portfolio displayed on August 25th, 2022. Open trade profits may have increased or decreased when trades were closed out. Trading incurs risk and some people lose money trading. Past performance does not necessarily predict future results. Member profits and losses are not tracked. Profit potential is taken from results of signaled trades, not actual member results. Not all members make the trades.
Chuck’s $3,000 Trading Scholarship
I don’t want you to miss a single opportunity to potentially reach your goals. That’s why I’d like to offer you a scholarship of the full $3,000 Enrollment Fee of my exclusive Inner Circle Trading Service.
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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.