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Lumentum Holdings (LITE) Is Coiling For An Up Move:
Lumentum Holdings hit all-time highs earlier this month and analysts believe there's further upside ahead. Here are two articles that reveal where Lumentum could be heading and why - Lumentum (LITE) PT Raised to $80 at Needham & Company; 3D Sensing Could Double LITE'S Value and DA Davidson Starts Lumentum (LITE) at Buy.
The technical outlook for LITE is solid. The stock has been trending higher for over a year and a half and an acceleration of momentum can be seen since the start of May, shortly after the company announced earnings.
The earnings report caused a gap above the 20-day moving average and the stock has held above it since. In addition to the moving average, horizontal support has been identified at $60.50 which held a decline earlier this month.
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Technicals
Lumentum has been consolidating sideways in a range over the past two weeks which is common in strong bullish trends. A break of the upper end of the range, identified at $65.30, is likely to accompany an acceleration to the upside.
*source Tradingview.com
If you agree there's further upside ahead for Lumentum, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next four weeks.
Buy To Open LITE 18Augy17 55 Puts (LITE170818P55)
Sell To Open LITE 18Aug17 60 Puts (LITE170818P60) for a credit of $1.73 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when LITE was trading at $64. 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 $2 per spread (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $171 and your broker would charge a $500 maintenance fee, making your investment $329 ($500 – $171). If LITE closes at any price above $60 on August 18, 2017, both options would expire worthless, and your return on the spread would be 52% (312% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
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. As we said above, the Terry’s Tips portfolio which places spreads like the above one has gained 90% in the first six months of 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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