Option Trade of the Day: Symantec (SYMC)
Yesterday saw a big reversal in the market as investors digested the latest financial news. The latest CPI report came in and it was in line with expectations and that caused stocks to open higher. By midday those gains had turned to small losses and by the end of the day the losses had turned in to more sizable losses. The three main indices closed near their lows of the day.[hana-code-insert name=’adsense-article’ /]The big reversal caused my scans to produce more bearish signals than bullish ones for the fourth straight night and the differential increased dramatically.
There were 74 bearish signals compared to only 15 bullish signals.
One of the stocks on the bearish list was Symantec (Nasdaq: SYMC) and the chart caught my eye.
The fundamentals on SYMC aren’t all that bad, but the momentum is definitely to the downside and the sentiment is higher than it should be.
We see a downward-sloped trend channel has dictated trade over the last six months and the stock is right up against the upper rail of the channel. We did get a bearish crossover from the stochastic readings last night. While I am a little concerned that this is the fourth of the last five trade ideas that is bearish, that is what the scans are producing.
Buy to open the July18 28 strike puts on SYMC at $2.05 or better. These options expire on July 20. Given the stock price and the option price, we are going to need a drop in the stock of approximately 12.6% to get the options to double. The good news is that we have until July on these options, so we have time on our side on this trade idea. The last two big declines in the fourth quarter of ’17 and the first quarter of this year were both much greater than what we need to get a 100% gain on this trade.
— Rick Pendergraft
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