Buying Pressure Pushes INFO Shares

November 17^th, 2021

Buying Pressure Pushes INFO Shares

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Duke Realty Corp., noting the stock’s 24/52 Day MACD line is trading above the 18-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for IHS Markit Ltd. stock symbol: INFO.

Before breaking down INFO’s OBV chart let’s first review which products and services are offered by the company.

IHS Markit Ltd. provides critical information, analytics, and solutions for various industries and markets worldwide. The company's information, analytics, and solutions enhance operational efficiency and offer deep insights for customers in business, finance, and government. Its Financial Services segment offers pricing and reference data, indices, valuation and trading services, trade processing, enterprise software, and managed services to traders, portfolio managers, risk managers, research professionals, and other financial market participants, as well as operations, compliance, and enterprise data managers.

Confirming a Price Uptrend with OBV

The INFO daily price chart below shows that INFO is in a price uptrend as the current price is above the price INFO traded at five 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 INFO 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 INFO

Since INFO's OBV line is sloping up, the most likely future price movement for INFO is up, making INFO a good candidate for a stock purchase or an call option purchase.

Let's use the Hughes Optioneering calculator to look at the potential returns for a INFO 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 INFO 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 INFO option example, we used the 1% Rule to select the INFO 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 INFO in-the-money option strike price, INFO 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 INFO stock is flat at 131.75 at option expiration, it will only result in a 1.2% loss for the INFO 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 can 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 INFO on 11/16/2021 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 INFO stock increases 5.0% at option expiration to 138.34 (circled), the call option would make 37.7% before commission.

If INFO stock increases 10.0% at option expiration to 144.93 (circled), the call option would make 76.5% before commission and outperform the stock return more than 7 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.

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

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Buying Pressure Pushes INFO Shares

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