JD Shares in the ‘Sell Zone’

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Metlife, Inc., noting the stock’s 24/52 Day MACD line is above the 18-Day EMA signaling a bullish stock.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for JD.com, Inc. stock symbol: JD.

Before breaking down JD’s daily Keltner Channel chart let’s first review which products and services are offered by the company.

JD.com, Inc. provides supply chain-based technologies and services in the People’s Republic of China. The company offers computers, communication, and consumer electronics products, as well as home appliances; and general merchandise products comprising food, beverage and fresh produce, baby and maternity products, furniture and household goods, cosmetics and other personal care items, pharmaceutical and healthcare products, books, automobile accessories, apparel and footwear, bags, and jewelry.

Now, let’s begin to break down the Keltner Channel chart for JD. Below is a Daily Price Chart and the three Keltner Channels for JD stock.

Sell JD Stock

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading below the lower Keltner Channel, this signals that the stock is temporarily oversold and subject to a rebound.

Even stocks that are in the strongest bearish trends do not decline in a straight line. There are always price rebounds along the way. When a stock becomes oversold, it’s price will typically rebound soon after as the inevitable buying the dip occurs.

The JD daily price chart shows that the stock is in a strong price decline and has become oversold several times. You can see this as JD has traded below the Lower Keltner Channel on multiple occasions recently.

But, in every scenario when JD became oversold, the stock soon experienced a price rebound.

Finding opportunities when a stock experiences a price rebound is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point for our bearish trades.

The Keltner Channel “Sell Zone” occurs when a stock is trading above the lower Keltner Channel. Once the daily price is trading above the lower channel, it provides a lower-risk buying opportunity for bearish trades as the stock is likely to decline further.

Our initial price target for JD stock is 36.00 per share.

Profit if JD is Down, Up, or Flat

Now, since JD is trading above the lower Keltner Channel, this provides us with a prime bearish trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a JD put option spread.

The Put Option Spread Calculator will calculate the profit/loss potential for a put option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% decrease to a 10.0% increase in JD 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 down, up, 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 JD on 11/2/2022 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $327 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if JD stock is flat or down at all at expiration the spread will realize a 52.9% return (circled).

And if JD stock increases 10.0% at option expiration, the option spread would make a 12.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 52.9% 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.

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.

Trade High Priced Stocks for $350 With Less Risk

One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, Netflix or Apple for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $27,000. With the stock purchase you are risking $27,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

Get Trade Insights Directly From Chuck

You can start getting market insights directly from 10-Time Trading Champion Chuck Hughes.

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.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HERE to schedule a call!

Wishing You the Best in Investing Success,