Yesterday, we looked at a Daily Price Chart of Airbnb Inc., noting the stock’s 50-Day EMA is trading below the 100-Day EMA signaling a ‘Sell’.
For today’s Trade of the Day we will be looking at an On Balance Volume chart for Agilysys Inc. stock symbol: AGYS.
Before breaking down AGYS’s OBV chart let’s first review which products and services are offered by the company.
Agilysys, Inc., together with its subsidiaries, operates as a developer and marketer of hardware and software products and services to the hospitality industry in North America, Europe, the Asia-Pacific, and India. It offers point of sale, property management systems, inventory and procurement, payments, reservations management, and seat solutions to enhance guest experience.
Confirming a Price Uptrend with OBV
The AGYS daily price chart below shows that AGYS is in a price uptrend as the current price is above the price AGYS traded at five 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 downtrend. 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.
On Balance Volume Indicator
● When Close is Up, Volume is Added
● When Close is Down, Volume is Subtracted
● A Cumulative Total of 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 AGYS 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 AGYS
Since AGYS’s OBV line is sloping up, the most likely future price movement for AGYS is up, making AGYS a good candidate for a stock purchase or a call option spread.
Let’s use the Hughes Optioneering calculator to look at the potential returns for an AGYS debit spread.
The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in AGYS 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 up, down 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 AGYS on 11/17/2022 before commissions.
Built in Profit Potential
For this option spread, the calculator analysis below reveals the cost of the spread is $310 (circled). The maximum risk for an option spread is the cost of the spread.
The analysis reveals that if AGYS stock is flat or up at all at expiration the spread will realize a 61.3% return (circled).
And if AGYS stock decreases 10.0% at option expiration, the option spread would make a 61.3% return (circled).
Due to option pricing characteristics, this option spread has a ‘built in’ 61.3% 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.
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 Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $29,500. With the stock purchase you are risking $29,500 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.
Average Portfolio Return of 316.9%
Below is a screenshot of the current open trade profit opportunities from Chuck’s Inner Circle Trading Service. There are currently $186,429.64 in open trade profit opportunities with an average portfolio return of 316.9% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios**.
**Open trade profit results represent the open trade profit performance for the portfolio displayed on 11/17/22. Open trade profits may have increased or decreased when trades were closed out. Trading incurs risk and some people lose money trading. Past performance does not necessarily predict future results. Member profits and losses are not tracked. Profit potential is taken from results of signaled trades, not actual member results. Not all members make the trades.
Chuck’s $3,000 Trading Scholarship
I don’t want you to miss a single opportunity to potentially reach your goals. That’s why I’d like to offer you a scholarship of the full $3,000 Enrollment Fee of my exclusive Inner Circle Trading Service***.
You can also CLICK HERE to schedule a call now!
Wishing You the Best in Investing Success,
Editor, Trade of the Day
Have any questions? Email us at email@example.com
*Trading incurs risk and some people lose money trading.
**Inner Circle trading program provides training package and specific trade signals for one year. First 10 people to sign up each day this offer is valid will get a waiver of the standard fee, which is the price charged to anyone signing up after the first 10 people per day. Additional costs apply to different programs.