Strong Trend Forming for AstraZeneca

Dear Reader,

On Friday, we looked at a Daily Price Chart for Hewlett Packard Enterprise Co., noting that HPE shares have been making a series of new 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for AstraZeneca plc stock symbol: AZN.

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

AstraZeneca plc, is one of the largest biopharmaceutical companies in the world. AstraZeneca’s business can be broken down into separate lines based on therapeutic classes. These include cardiovascular, respiratory, immunology, oncology, rare diseases and other.

Now, let’s begin to break down the Daily Price chart for AZN stock.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for AZN.

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.

50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy AZN Stock

As the chart shows, on March 19^th, the AZN 50-Day EMA, crossed above the 100-Day EMA.

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

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for AZN stock is 81.25 per share.

124.4% Profit Potential for AZN Option

Now, since AZN’s 50-Day EMA is trading above the 100-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an AZN 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 AZN 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 AZN option example, we used the 1% Rule to select the AZN 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.

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Trade with Higher Accuracy

When you use the 1% Rule to select an AZN in-the-money option strike price, AZN 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 AZN stock is flat at 79.31 at option expiration, it will only result in a 10.0% loss for the AZN 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 AZN on 6/17/2024 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 AZN stock increases 5.0% at option expiration to 83.28 (circled), the call option would make 57.2% before commission.

If AZN stock increases 10.0% at option expiration to 87.24 (circled), the call option would make 124.4% before commission and outperform the stock return more than 12 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.

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Wishing You the Best in Investing Success,