Take a look at my newest find. Today I’m going to give you an overview of the stock, explain the indicator I use to find prime entry points, and then I’ll show you the option trade that I’m looking at.

Dell Technologies Inc. (DELL) designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).

Take a look at the chart below.

Time to Buy DELL 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 above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement.

Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, its price will typically decline soon after as the inevitable profit taking occurs.

The DELL daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as DELL has traded above the Upper Keltner Channel on multiple occasions recently.

But, in every scenario when DELL became overbought, the stock soon experienced a pullback.

Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.

The Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower-risk buying opportunity as the stock is likely to rally.

85.2% Profit Potential

The analysis reveals that if DELL stock is flat or up at all at expiration the spread will realize an 85.2% return (circled). 

And if DELL stock decreases 7.5% at option expiration, the option spread would make a 46.7% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 85.2% 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.

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.