Residential Real Estate ETF Pushes Higher

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June 2nd, 2021 Residential Real Estate ETF Pushes Higher Dear Reader, Yesterday, we looked at a Daily Price Chart of United Parcel Service, Inc., 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 the iShares Residential Real Estate ETF symbol: REZ. Before breaking down REZ’s OBV chart let’s first review the investment objective of the ETF. The REZ ETF seeks to track the investment results of the FTSE NAREIT All Residential Capped Index composed of U.S. residential, healthcare and self-storage real estate equities. The underlying index measures the performance of the residential apartments, manufactured homes, healthcare and self-storage real estate sectors of the U.S. equity market. Confirming a Price Uptrend with OBV The REZ daily price chart below shows that REZ is in a price uptrend as the current price is above the price REZ 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 REZ 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 REZ Since REZ's OBV line is sloping up, the most likely future price movement for REZ is up, making REZ a good candidate for an ETF purchase or a call option purchase. Let's use the Hughes Optioneering calculator to look at the potential returns for a REZ 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 REZ 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 REZ option example, we used the 1% Rule to select the REZ 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 REZ stock is 90.00 per share. Trade with Higher Accuracy When you use the 1% Rule to select an REZ in-the-money option strike price, the REZ ETF 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 the REZ ETF is flat at 81.99 at option expiration, it will only result in a 1.5% loss for the REZ 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/ETFs. The prices and returns represented below were calculated based on the current ETF and option pricing for REZ on 6/1/2021 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying ETF continues to move up in price. For this specific call option, the calculator analysis below reveals if the REZ ETF increases 5.0% at option expiration to 86.09 (circled), the call option would make 56.2% before commission. If the REZ ETF increases 10.0% at option expiration to 90.19 (circled), the call option would make 113.9% before commission and outperform the ETF return more than 11 to 1. The leverage provided by call options allows you to maximize potential returns on bullish stocks/ETFs. 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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