Dear Reader,

For today’s Trade of the Day we will be looking at a chart for Republic Services, Inc. (RSG). Republic Services is the second largest provider of non-hazardous solid waste collection, transfer, disposal, recycling, and energy services in the United States. The company is engaged in landfill gas-to-energy and renewable energy projects. The company generates revenues mainly from its solid waste collection operations.

Confirming a Price Uptrend with OBV

The RSG daily price chart below shows that RSG is in a price uptrend as the current price is above the price RSG traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for RSG is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

Confirmed ‘Buy’ Signal for RSG

Since RSG’s OBV line is sloping up, the most likely future price movement for RSG is up, making RSG a good candidate for a stock purchase or a call option purchase.

Let’s use the Hughes Optioneering calculator to look at the potential returns for an RSG call option purchase.

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Trade with Higher Accuracy

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 RSG stock increases 5.0% at option expiration to 201.35 (circled), the call option would make 65.5% before commission. 

If RSG stock increases 10.0% at option expiration to 210.94 (circled), the call option would make 139.8% before commission and outperform the stock return nearly 14 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.

The prices and returns represented below were calculated based on the current stock and option pricing for RSG on 4/22/2024 before commissions.

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Wishing You the Best in Investing Success,

Chuck Hughes

Editor, Trade of the Day

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*Trading incurs risk and some people lose money trading.