Travelers Primed For Next Move Higher?

Let’s take a look at one of my favorite indicators to see if The Travelers Companies Inc. (TRV) appears ready for a bullish breakout.

The Travelers Companies Inc., a holding company, is principally engaged, through its subsidiaries, in providing a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets.

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

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

Buy Signal for TRV?

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.

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.

Now, as you can see, the 50-Day EMA is above the 100-Day EMA meaning that TRV is on a ‘buy’ signal.

58.7% Profit Potential if TRV is Up, Down or Flat

Now, since TRV’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a TRV call option spread.

For this option spread, the calculator analysis below reveals the cost of the spread is $315 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if TRV stock is flat, up, or down 10% at expiration the spread will realize a 58.7% return (circled)*.

The prices and returns represented below were calculated based on the current stock and option pricing for TRV on 3/12/2024 before commissions.

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