Happy Wonderful Wednesday!
Last week, after reaching an all-time high on Monday, the market dropped 3 days out of 5. And this week started with a modestly bullish climb on Monday just like last week. All the indices are in the area of recovering from the pullback. We will continue to watch how the week plays out.
To review past equity candidates, scroll down.
For today’s Trade of the Day, we will be looking at Regeneron Pharmaceuticals, Inc. symbol (REGN). Before analyzing REGN’s chart, let’s take a closer look at the stock and its services.
Regeneron Pharmaceuticals, Inc. discovers, invents, develops, manufactures, and commercializes medicines for treating various medical conditions worldwide.
Regeneron Pharmaceuticals, Inc. was founded in 1988 and is headquartered in Tarrytown, New York.
I looked through a lot of charts over the weekend. I zeroed in on REGN on Monday because it looks ready to climb further. It is a widely traded stock with lots of volume.
On the ADX indicator below the chart, notice how the green +DI line is on top of the -DI line (red) and the ADX. The green +DI line is heading up and the ADX line appears to be starting to turn up. These are all signals of building bullish strength with the thought that price may continue to rise.
For those who want more info on ADX, I give more details in the section below, or scroll down to the trade info.
Average Directional Index (ADX) Points to Direction and Strength
ADX is an easy indicator to interpret. The +DI line (green) is bullish and when it is on top, it suggests price is going to head up. When the -DI line (red) is on top, it suggests price is going to drop.
The black line is the strength line and when it heads up, it is telling you strength is moving into the DI line that is on top and in control. When the ADX line has been heading down, the DI line on top has been weakening and is ready for a change.
When the DI lines swap places and cross up and the ADX heads up, it suggests strength is moving into the new DI direction.
ADX signal = Profit Payout
Each candle on the chart represents price movement of a week. As the +DI heads up and moves further above the black line and both rise above the red line, it suggests there is bullish strength that could continue to grow, especially once the black line starts to turn up. If price continues to rise, the ADX line (black) will continue to turn to head up to imply that strength will continue to support the trade. As long as the ADX is heading up, it means it is supporting the bullish- up direction. The opposite is true if the -DI line heads up to cross the +DI line – this suggests bearish strength and a climb in price. If the ADX line heads up while the red line -DI is on top, is it saying strength is building into the downward direction.
I am looking at its chart and possible trade on Monday, but the pattern looks as if it will continue and the +DI may continue heading up if price keeps rising. You don’t want to consider entry if the current candle doesn’t stay above 181 or if the +DI line were to turn back down.
REGN Potential Trade
Please note and remember that I am typing this on Monday, two days before you receive it and the information, I am sharing could change over those two days and is intended to share the opportunities that options offer us.
Regeneron (REGN) was up the last couple weeks, suggesting it may continue its upward bias. It appears to be ready to head higher and the ADX turn up further, if this continues, the pattern should remain intact as price keeps rising. Notice the +DI is heading up and is above the -DI line on the chart above. We want the +DI to stay above the -DI (green line above red) to consider a trade.
Price is likely to rise further and move above 640 entry. Its first target is 660 as the +DI (green line) stays above and the ADX (black line) turns up. Its current uptrend should remain intact, and price should continue to rise, perhaps even higher. We will keep an eye on REGN over the next couple weeks.
I am looking at charts on Monday, so prices are apt to change a little by Wednesday. Be sure the green +DI line continues to rise and goes further above the red -DI line and price stays above 640 before entry.
REGN is a more expensive stock and trading it isn’t right for every account, but we can still learn about trading by watching its price action. The short-term price target for REGN is $660, and then perhaps higher.
To buy shares REGN today, price would be approximately 640. It would be silly to buy shares if you expect price to drop. You’d wait until it hit a bottom and started to rise again. If price stays above 640, perhaps you could buy 7 shares for $4,480. If price rose to $660, that would be a profit of $20 or $140 for the 7 shares or a 3.1% gain.
This said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise. Let’s take a look.
If you bought one Call option contract covering 100 shares of REGN’s stock with a December 3rd expiration date (Dec wk1) for the $640 strike and premium would be approximately $47.50 today or a total of $4,750 per contract. If price increased the expected $20 to $660 target over the next few weeks, the premium might increase approximately $15 to $ 62.50 per share or $6,250 on your 100-share contract. This is a gain of $1,500 on your $4,750 investment or a 31% gain over a couple week
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock and potentially offer greater profits.
If you are having any kind of trouble taking advantage of these trades, I don’t want you to miss out. I have put together programs that help traders just like you access the potential profits that options provide. I write like we are having a conversation, so the information is easy to understand and apply. Be sure to check out the programs shared in this email and we will make it easy for you to get your share.
I love to trade, and I love to teach. It is my thing.
Yours for a prosperous future,
PS-I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups are a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves. If you are interested in learning how to apply these tools and increase the potential of each trade, click here to learn more.
Review of Past Candidates:
Three weeks ago, we looked at TGT with a Nov 19 expiration, 270 strike and a premium of 3.65. It rose as high as 5.75 today or a gain of 58%. As expiration nears, it will start losing more time decay.
Two weeks ago, we studied SPOT with a Nov 26th (Nov wk 4) expiration, a strike of 310 and premium of 6.90. On Tuesday, it rose as 305.60 and then, started dropping. It continued to drop for the next 3 days and is down today as well. There would have been no trade entry. It has again started up, but has not recovered.
Last week, we examined AXP and an expiration on Nov 26 th (Nov wk 4), a 190 strike and a premium of 1.05. On Wednesday it went as high as 1.38 (with up and down swings), and on Thursday it headed down and hasn’t recovered. It is at .63 as I type.