138.0% Profit Potential for AZN

July 22nd, 2020 138.0% Profit Potential for AZN Dear Reader, Yesterday, we looked at Daily Price Chart and an OBV line for Overstock.com Inc. noting that the stock's OBV line was sloping up. For today's Trade of the Day e-letter we will be looking at a daily price chart for Astrazeneca PLC stock symbol: AZN. Before breaking down AZN's daily chart let's first review what products and services the company offers. AstraZeneca PLC discovers, develops, and commercializes prescription medicines in the areas of oncology, cardiovascular, renal and metabolism, respiratory, autoimmunity, infection, neuroscience, and gastroenterology worldwide. The company serves primary care and specialty care physicians through distributors and local representative offices. Now, let's begin to break down the Daily Price chart for AZN stock. Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for Astrazeneca PLC. 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. As the chart shows, on April 21st, the AZN 50-Day EMA, crossed above the 100-Day EMA. This crossover indicated the buying pressure for AZN 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 in the coming days and weeks. Our initial price target for AZN is 63.00 per share. Chuck Reveals His 6 Minute Income Trading Strategy Air Force veteran Chuck Hughes started out just like you. He had no knowledge about stock and option investing and didn't know where to start. He spent years learning the ins and outs of options investing and his hard work paid off. Chuck mastered the market, winning 10 Trading Championships! Now, he is sharing his 6 Minute Trading Secret with the world. Get more details here. 138.0% Profit Potential for AZN Option Now, since AZN'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 an AZN 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 AZN 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 AZN option example, we used the 1% Rule to select the AZN 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 AZN in-the-money option strike price, AZN 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 AZN stock is flat at 58.07 at option expiration, it will only result in a 1.9% loss for the AZN 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 AZN on 7/21/2020 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 AZN stock increases 5.0% at option expiration to 60.97 (circled), the call option would make 68.0% before commission. If AZN stock increases 10.0% at option expiration to 63.88 (circled), the call option would make 138.0% before commission and outperform the stock return nearly 14 to 1. And if AZN stock increases to our initial price target of 63.00 at option expiration the call option would make 116.9% before commission. 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. Want Chuck to Send You Trades? You can start receiving hand-picked trades from Chuck today! Chuck is offering special pricing for his Weekly Option Alert Trading Service for Trade of the Day subscribers. 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? 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