June 24th, 2022
CYTK Flashes PowerTrend ‘Buy’ Alert
Dear Reader,
Yesterday, we looked at a Daily Price Chart of Home Depot, Inc., noting that the stock has been making a series of new 52-Week Lows.
For today's Trade of the Day e-letter we will be looking at a monthly chart for Cytokinetics Inc. stock symbol: CYTK.
Before breaking down CYTK's monthly chart let's first review what products and services the company offers.
Cytokinetics, Incorporated, a late-stage biopharmaceutical company, focuses on discovering, developing, and commercializing muscle activators and inhibitors as potential treatments for debilitating diseases. The company develops small molecule drug candidates primarily engineered to impact muscle function and contractility.
Now, let's begin to break down the monthly chart for CYTK stock.
Below is a 10-Month Simple Moving Average chart for Cytokinetics Inc.
Buy CYTK Stock
As the chart shows, in July 2021, the CYTK 1-Month Price, crossed above the 10-Month simple moving average (SMA).
This crossover indicated the buying pressure for CYTK stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.
Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!
As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased. Our initial price target for CYTK is 49.85 per share.
Profit if CYTK Is Down 10%
Now, since CYTK's 1-Month Price is trading above the 10-Month SMA and will likely rally from here, let's use the Optioneering calculator to look at the potential returns for a CYTK covered call trade. Covered calls are also known as buy writes.
The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in CYTK stock at option expiration.
The goal of this example is to demonstrate the 'built in' profit potential for covered calls and the ability of covered calls to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don't list the option strike price used in the profit/loss calculation.
The prices and returns represented below were calculated based on the current stock and option pricing for CYTK on 6/23/2022 before commissions.
Built in Profit Potential
For this covered call, the calculator analysis below reveals the cost or the breakeven price is $3,747 (circled). The maximum risk for a covered call is the cost of the covered call.
The analysis reveals that if CYTK is flat at 47.47 or up at all at expiration the covered call will realize a $953.00 profit and a 25.4% return (circled).
If CYTK decreases 5.0% at option expiration, the covered call will realize a $762.65 profit and a 20.4% return.
And if CYTK decreases 10.0% at option expiration, the covered call will realize a $525.30 profit and a 14.0% return.
Due to option pricing characteristics, this covered call has a 'built in' 25.4% profit potential when the trade was initiated.
Covered call trades can result in a higher percentage of winning trades compared to a directional stock trade if you can profit when the underlying stock/ETF is up, down or flat.
A higher percentage of winning trades can give you the discipline needed to become a successful trader.
The 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 Trade Return of 193.5%
Below is a screenshot of the current open trade profit opportunities for covered call trades from Chuck's Weekly Option Alert Covered Call Portfolios. There are currently $113,694.00 in open trade profits with an average trade return of 193.5% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing trades*.
*Trading incurs risk and may not be suitable for all investors. You may lose money trading.
Hughes Optioneering Strategies Perform In All Markets
This isn't Chuck's first bear market…
Over the past 20+ years, Chuck's strategies have proven to perform, even in the most volatile markets.
His strategies championed market corrections, the Dot-Com Crash, and the 2008 Great Recession.
This is your chance to gain access to his proven strategies and start receiving hand-picked trades from 10-Time Trading Champion!
Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join his Weekly Option Alert Trading Service and use the code “Optioneering VIP” to receive special pricing.
You can also CLICK HERE to schedule a call!
Wishing You the Best in Investing Success,
Chuck Hughes
Editor, Trade of the Day
Have any questions? Email us at dailytrade@chuckstod.com
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