Subject: Copart (CPRT) Is a Buy on Dips

 

Terrys Tips newsletter
     

Dear Friend,

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry 

 
Option Tip of the Week
Copart (CPRT) Is a Buy on Dips

Recent news articles on Copart suggest the stock is well positioned for further gains. Check out these two articles for the reasoning behind the sentiment - Why Copart (CPRT) Stock Might be a Great Pick and Is Copart (CPRT) a Great Growth Stock?

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Technicals

The main thing CPRT has going for it, from a technical perspective, is the upward momentum. The stock has rallied with strength ever since the 50-day moving average crossed above the 100-day near the start of the year. Dips have been shallow and promptly bought up and the stock is up nearly 70% on the year. The dip in the past week was met with strong buying from the 20-week moving average which has resulted in the print of a bullish reversal candlestick on a weekly chart. CPRT is certainly an outperformer and it seems the stock only needs a small push to break to fresh record highs.

 CPRT Chart October 2019

*source Tradingview.com

If you agree there's further upside ahead for CPRT, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open CPRT 15NOV19 75 Puts (CPRT191115P75)

Sell To Open CPRT 15NOV19 80 Puts (CPRT191115P80) for a credit of $1.58 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CPRT was trading near $80.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $156.70 and your broker would charge a $500 maintenance fee, making your investment $343.30 ($500 – $156.71).  If CPRT closes at any price above $80 on November 15, both options would expire worthless, and your return on the spread would be 45% (429% annualized).

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Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates October 5, 2019

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.  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

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I look forward to having you on board, and to prospering with you.

Terry
 

 

    
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You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it. We will then sign you up for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80).  You get $300.65 worth of services without paying us one penny.

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Sincerely,
Dr. Terry Allen
Terry's Tips

 
 
Week 558

October 7, 2019
 
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