| Waste Management Inc. on PowerTrend Buy Signal |
Dear Reader,
Yesterday, we looked at a Daily Price Chart for Zillow Group Inc., noting the stock's 50-Day EMA is trading above the 100-Day EMA signaling a bullish trend.
For today's Trade of the Day e-letter we will be looking at a monthly chart for Waste Management Inc. stock symbol: WM.
Before breaking down WM's monthly chart let's first review what products and services the company offers.
Waste Management, Inc., through its subsidiaries, provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
Now, let's begin to break down the monthly chart for WM stock.
Below is a 10-Month Simple Moving Average chart for Waste Management Inc. |
As the chart shows, in July, the WM 1-Month Price, crossed above the 10-Month simple moving average (SMA).
This crossover indicated the buying pressure for WM 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 in the coming days and weeks.
We'll be keeping our eye on this stock as it continues to trend upward, so we'll know the moment the market conditions shift and the stock begins to come back down.
Our initial price target for WM is 125.10 per share. |
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| | Small Accounts Can Create BIG Profits |
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| Market guru and 10-time Trading Champion Chuck Hughes started out with a $4,600 trading account.
Chuck made over $460,000 in profits his first two years trading which is more than earned the previous six years working as an airline pilot. Now, he's willing to share his simple to learn and successful method.
Click here to learn more. |
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| | 120.9% Profit Potential for WM Option
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Now, since WM's Monthly Price is currently trading above the 10-Month SMA and the stock will likely rally from here, let's use the Hughes Optioneering calculator to look at the potential returns for a WM 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 WM 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 WM option example, we used the 1% Rule to select the WM 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.
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Trade with Higher Accuracy
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When you use the 1% Rule to select a WM in-the-money option strike price, WM 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 WM stock is flat at 114.04 at option expiration, it will only result in a 0.7% loss for the WM 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 WM on 9/28/2020 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 WM stock increases 5.0% at option expiration to 119.74 (circled), the call option would make 62.0% before commission.
If WM stock increases 10.0% at option expiration to 125.44 (circled), the call option would make 124.7% before commission and outperform the stock return more than 12 to 1.
And if WM stock increases to our initial price target of 125.10 at option expiration the call option would make 120.9% 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.
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Chuck's Inner Circle Trading Service |
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| You can start receiving hand-picked trades from Chuck today!
Chuck is offering special pricing for his Inner Circle 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! |
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Wishing You the Best in Investing Success,
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| | Chuck Hughes Editor, Trade of The Day
Have any questions? Email us at dailytrade@chuckstod.com |
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