Athletic Apparel Stock Bounding Higher

December 2nd, 2020 Athletic Apparel Stock Bounding Higher Dear Reader, Yesterday, we looked at Daily Price Chart for Broadcom Inc. noting that the stock's OBV line is sloping up, validating the stock's bullish trend. For today's Trade of the Day e-letter we will be looking at a daily price chart for Nike Inc. stock symbol: NKE. Before breaking down NKE's daily chart let's first review what products and services the company offers. NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. The company offers NIKE brand products in six categories, including running, NIKE basketball, the Jordan brand, football, training, and sportswear. It also markets products designed for kids, as well as for other athletic and recreational uses, such as American football, baseball, cricket, golf, lacrosse, skateboarding, tennis, volleyball, walking, wrestling, and other outdoor activities. Now, let's begin to break down the Daily Price chart for NKE stock. Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for Nike Inc.

50-Day EMA and 100-Day EMA 'Buy' Signal The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving. -50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal -50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock's buying pressure has begun to outweigh the selling pressure signaling a 'buy' signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a 'sell' signal.

Buy NKE Stock As the chart shows, on May 29th, the NKE 50-Day EMA, crossed above the 100-Day EMA. This crossover indicated the buying pressure for NKE stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend. Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the 'buy' signal is still in play. As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased. Our initial price target for NKE stock is 146.43 per share. 113.2% Profit Potential for NKE Option Now, since NKE's 50-Day EMA is trading above the 100-Day EMA this means the stock's bullish rally will likely continue. Let's use the Hughes Optioneering calculator to look at the potential returns for a NKE 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 NKE 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 NKE option example, we used the 1% Rule to select the NKE 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 a NKE in-the-money option strike price, NKE 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 NKE stock is flat at 135.44 at option expiration, it will only result in a 7.2% loss for the NKE 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 NKE on 12/1/2020 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 NKE stock increases 5.0% at option expiration to 142.21 (circled), the call option would make 53.0% before commission. If NKE stock increases 10.0% at option expiration to 148.98 (circled), the call option would make 113.2% before commission and outperform the stock return more than 11 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. Trade High Priced Stocks for $350 With Less Risk One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $175,000. With the stock purchase you are risking $175,000 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases. Start Trading Like Chuck Today! Today Chuck is offering you a very special deal. As a Trade of the Day subscriber, if you sign up and become a member of The Chuck Hughes Inner Circle Trading Service today, he will give you special discount. 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

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