Buying Pressure Pushes EMN Higher

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May 13th, 2021 Buying Pressure Pushes EMN Higher Dear Reader, Yesterday, we looked at a Daily Price Chart of Discover Financial Services, noting the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’. For today’s Trade of the Day we will be looking at an On Balance Volume chart for Eastman Chemical Co. stock symbol: EMN. Before breaking down EMN’s OBV chart let’s first review which products and services are offered by the company. Eastman Chemical Company operates as a specialty materials company worldwide. The company's Additives & Functional Products segment offers hydrocarbon and rosin resins; organic acid-based solutions; amine derivative-based building blocks; metam-based soil fumigants, thiram and ziram based fungicides, and plant growth regulators; specialty coalescent, specialty and commodity solvents, paint additives, and specialty polymers; heat transfer and aviation fluids; insoluble sulfur and anti-degradant rubber additives; and performance resins. Confirming a Price Uptrend with OBV The EMN daily price chart below shows that EMN is in a price uptrend as the current price is above the price EMN traded at six months ago (circled). The On Balance Volume chart is below the daily chart. On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line. On Balance Volume Indicator ● When Close is Up, Volume is Added ● When Close is Down, Volume is Subtracted ● A Cumulative Total of Additions and Subtractions form the OBV Line Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend.  We can see from the OBV chart below that the On Balance Volume line for EMN is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability. The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price up trend. Confirmed ‘Buy’ Signal for EMN Since EMN's OBV line is sloping up, the most likely future price movement for EMN is up, making EMN a good candidate for a stock purchase or a call option purchase. Let's use the Hughes Optioneering calculator to look at the potential returns for an EMN call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat EMN price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following EMN option example, we used the 1% Rule to select the EMN option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation. Our initial price target for EMN stock is 132.80 per share. Trade with Higher Accuracy When you use the 1% Rule to select an EMN in-the-money option strike price, EMN stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if EMN stock is flat at 125.08 at option expiration, it will only result in a 10.8% loss for the EMN option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price will result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks. The prices and returns represented below were calculated based on the current stock and option pricing for EMN on 5/12/2021 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price. For this specific call option, the calculator analysis below reveals if EMN stock increases 5.0% at option expiration to 131.33 (circled), the call option would make 44.5% before commission. If EMN stock increases 10.0% at option expiration to 137.59 (circled), the call option would make 99.9% before commission and outperform the stock return nearly 10 to 1. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify winning trades just like this one. Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Get Chuck's Trades Sent to You! Do you want to start receiving hand-picked trades from 10-Time Trading Champion, Chuck Hughes? As a Trade of the Day subscriber, Chuck is offering you a special discount on his Weekly Option Alert Trading Service. Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing!   Wishing You the Best in Investing Success, Chuck Hughes Editor, Trade of the Day Have any questions? Email us at dailytrade@chuckstod.com   If you didn't create an account using this email address, please ignore this email or unsubscribe. To ensure delivery of this email to your inbox and to enable images to load in future mailings, please add todaystrade@chuckstod.com to your e-mail address book or safe senders list. © 2021 Tradewins Publishing. All rights reserved. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the "Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by Legacy Publishing, LLC ("Legacy") a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk and is not appropriate for everyone. The actual profit results presented here may vary with the actual profit results presented in other Legacy Publishing LLC publications due to the different strategies and time frames presented in other publications. Trading on margin carries a high level of risk and may not be suitable for all investors. Other than the refund policy detailed elsewhere, Legacy does not make any guarantee or other promise as to any results that may be obtained from using the Services. Legacy disclaims any and all liability for any investment or trading loss sustained by a subscriber. You should trade or invest only 'risk capital' - money you can afford to lose. 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Legacy makes no representations or warranties that any account will or is likely to achieve profits similar to those shown. No representation is being made that you will achieve profits or the same results as any person providing a testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have subsequently experienced losses. The cost basis for some of the options in a portfolio may be reduced by rolling over profits at option expiration which is one of the Hughes Optioneering Trade Management Rules. Some income figures presented represent the total amount of option premium collected during the referenced period. Actual profits were less. Open trade profit results may have increased or decreased when the trades were closed out. Chuck Hughes' experiences are not typical. Chuck Hughes is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position, willingness to follow the rules and other factors.

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