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Cognex (CGNX) Is Set to Make New Records
Cognex reported earnings at the start of the month which led to a rally above a significant technical hurdle. Cowen has since raised price targets to $135 and Zack's equity research has written a compelling article outlining why they expect further upside in addition to rating the stock as a Strong Buy.
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Technicals
CGNX rallied to a record high after earnings, taking out a notable barrier from a horizontal level at $96.06 as well as the psychological $100.00 price point. The horizontal level had previously held the stock lower on several attempts since early June.
The stock price has since corrected lower and over the past week the $100.00 level has held buyers to lift the price higher. In the event the psychological level does not hold, support at $96.06 carries confluence with the 20-day moving average and a rising trendline that originates from a low posted in early July.
*source Tradingview.com
If you concur that Cognex has some further upside potential, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next five weeks.
Buy To Open CGNX 15SEP17 95 Puts (CGNX170915P140)
Sell To Open CGNX 15SEP17 100 Puts (CGNX170915P145) for a credit of $1.43 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when CGNX was trading near $101. Unless the stock rallies quickly from here, you should be able to get close to this amount.
If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $141 and your broker would charge a $500 maintenance fee, making your investment $359 ($500 – $141). If CGNX closes at any price above $100 on September 15, 2017, both options would expire worthless, and your return on the spread would be 39% (408% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates August 11, 2017
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. The Terry’s Tips portfolio which places spreads like the above one has gained 114.7% so far in 2017 in spite of incurring some losses on some of the spreads placed. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
I look forward to having you on board, and to prospering with you.
Terry
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