New 52-Week Highs For AVB

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Chuck's Trade of the Day

May 26th, 2021

New 52-Week Highs For AVB

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Evercore Partners Inc. noting the stock’s OBV line is sloping up, validating the stock’s bullish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Avalonbay Communities, Inc. stock symbol: AVB.

Before breaking down AVB’s daily price chart let’s first review which products and services are offered by the company.

As of December 31, 2020, Avalonbay Communities, Inc. owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas. 

Now, let’s begin to break down the Daily Price chart for AVB. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Buy AVB Stock

The Daily Price chart above shows that AVB stock has been hitting new 52-Week Highs regularly since mid-May.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for AVB stock is 216.30 per share.

99.2% Profit Potential for AVB Option

Now, since AVB stock is currently making a series of 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an AVB 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 AVB 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 AVB option example, we used the 1% Rule to select the AVB 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.

Trade with Higher Accuracy

When you use the 1% Rule to select an AVB in-the-money option strike price, AVB 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 AVB stock is flat at 204.40 at option expiration, it will only result in a 3.0% loss for the AVB 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 AVB on 5/25/2021 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 AVB stock increases 5.0% at option expiration to 214.62 (circled), the call option would make 48.1% before commission.

If AVB stock increases 10.0% at option expiration to 224.84 (circled), the call option would make 99.2% 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.

Average Portfolio Return of 262.6%

Below is a screenshot of the current open trade profit results from Chuck’s Weekly Option Alert Trading Service. There are currently $623,348.88 in open trade profits with an average portfolio return of 262.6% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios.

Chuck's Trades Are Within Your Reach

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 Huges Signature

Chuck Hughes

Editor, Trade of the Day

Have any questions? Email us at dailytrade@chuckstod.com

 

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