June 23rd, 2022

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Lennar Corp. noting the stock’s 24/52 Day MACD is below the 18-Day EMA signaling a ’Sell’.

For today’s Trade of the Day we will be looking at a Daily Price chart for Home Depot, Inc. stock symbol: HD.

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

The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products The company also offers installation services for flooring, cabinets and cabinet makeovers, countertops, furnaces and central air systems, and windows. 

Now, let’s begin to break down the Daily Price chart for HD. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Sell HD Stock

The Daily Price chart above shows that HD stock has been hitting new 52-Week Lows regularly since mid-June.

Simply put, a stock does not just continually hit a series of new 52-Week Lows unless it is in a very strong bearish downtrend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Lows as this is a good indicator that the stock is in a powerful downtrend.

You see, after a stock makes a series of two or more 52-Week Lows, the stock typically continues its price downtrend and bearish positions should be initiated.

Our initial price target for HD stock is 245.00 per share.

Profit if HD is Down, Up, or Flat

Now, since HD shares are making a series of new 52-Week Lows, the stock will likely continue its trend downward. Let’s use the Hughes Optioneering calculator to look at the potential returns for a HD 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 7.5% decrease to a 7.5% increase in HD 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 HD on 6/22/2022 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $288 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if HD stock is flat or down at all at expiration the spread will realize a 73.6% return (circled).

And if HD stock increases 7.5% at option expiration, the option spread would make a 73.6% return (circled).

Due to option pricing characteristics, this option spread has a ’built in’ 73.6% profit potential when the trade was initiated.

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 winning trades 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, or Netflix for as little as $350. With an option spread you can control 100 shares of Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $222,000. With the stock purchase you are risking $222,000 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

Afraid of Market Volatility Rocking Your IRA?

Chuck Hughes isn’t afraid of market volatility, he takes advantage of it. Chuck is used to turbulence.

His years as a pilot gave him the ability to weather even the worst storms.

He has tested and proven strategies that thrive during turbulent market conditions.

You could gain access to these strategies and start receiving hand picked trades from Chuck today!

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

Wishing You the Best in Investing Success,

Chuck Hughes

Editor, Trade of the Day

Have any questions? Email us at dailytrade@chuckstod.com