This under-the-radar tech stock could be due for a comeback. How to play it with options
While the Magnificent 7 stocks and the broader tech sector are showing relative weakness, particularly against the Dow Jones Industrial Average, the markets are showing clear signs of recovery. This trend aligns with the post-Trump trade momentum, potentially paving the way for a year-end Santa rally. One of those technology stocks showing weakness is Universal Display Corp (OLED) , which has experienced a more than 20% drop in just over two weeks despite posting better-than-expected earnings. Universal Display develops LED light technologies used in phones, tablets and TVs. Examining OLED’s 6-month daily chart reveals early indications of a recovery, suggesting that the sell-off might be nearing its conclusion. The following technical indicators form the basis for my bullish outlook on OLED: I cover many of these setups in my book Mean Reversion Trading and provide further insights and resources on my website RSI (Relative Strength Index): When the RSI falls below 30, the shares are considered oversold. Notably, the RSI dipped below 30 between 11/ 2 and 11/19, and has since rebounded. DMI (Directional Movement Index): A downtrend is signaled when the DI- (red line) is above the DI+ (green line). However, a potential trend reversal is indicated when these lines begin to change direction. Observably, both DI- and DI+ are reversing course, suggesting an early sign of a trend change. Support/Resistance Beyond technical indicators, traditional support and resistance levels further validate this trade setup. OLED has shown strong support at the 160 level, with the stock rebounding from this area, reinforcing the bullish case. To take a bullish trade on OLED, I’m using a trade structure called a “bull call spread.” The trade To construct my bull call spread, I need to buy a $165 call and sell a $170 call as a single unit. If OLED keeps going up from here and the stock price is above $170, a 170-175 call spread is also a feasible trade setup. Here is my exact trade setup: Buy $165 call, Dec 20th expiry Sell $170 call, Dec 20th expiry Cost: $250 Potential Profit: $250 If OLED trades at or above the short strike by the expiration date, this trade will yield a return of 100% on the amount risked. With 10 contracts, this equates to risking $2500 to potentially gain $2500. DISCLOSURES: (Nishant has an OLED 170-175 call spread expiring on 12/20/2024.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
#undertheradar #tech #stock #due #comeback #play #options