Prime Opportunity: Introducing My Latest Find!

Dear Reader,

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Core & Main, Inc. stock symbol: CNM.

Before breaking down CNM’s monthly chart let’s first review what products and services the company offers.

Core & Main, Inc. distributes water, wastewater, storm drainage, and fire protection products and related services to municipalities, private water companies, and professional contractors in the municipal, non-residential, and residential end markets in the United States.

Now, let’s begin to break down the monthly chart for CNM stock.

Below is a 10-Month Simple Moving Average chart for Core & Main, Inc.

Buy CNM Stock

As the chart shows, in February 2023, the CNM 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for CNM stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for CNM is 50.00 per share.

82.7% Profit Potential for CNM Option

Now, since CNM’s 1-Month Price is trading above the 10-Month SMA 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 CNM 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 CNM 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 CNM option example, we used the 1% Rule to select the CNM 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 CNM in-the-money option strike price, CNM 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 CNM stock is flat at 44.42 at option expiration, it will only result in a 8.9% loss for the CNM 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 CNM on 2/12/2024 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 CNM stock increases 5.0% at option expiration to 46.64 (circled), the call option would make 36.9% before commission.

If CNM stock increases 10.0% at option expiration to 48.86 (circled), the call option would make 82.7% before commission and outperform the stock return more than 8 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 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.

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Wishing You the Best in Investing Success,