The last week of August is particularly vulnerable to sudden market moves, good trending days.
Trading is thin, but this can work in your favor when you catch a good trend.
Today’s trade is a stock that got pulled down to support on Friday, and it’s ready to move back to new highs.
With a simple long call, this could become a huge winner if the markets pop to the upside.
Read below for the details
In the chart of Mastercard (MA) below, you’ll see that before Friday’s market decline, MA was about to break out to new highs.
If MA breaks out to new highs, its consolidation pattern suggests it could rally to $300.
With its bullish action since its August low, there is an opportunity to enter before the breakout.
There is also a tight stop set up as a result of yesterday’s range.
The trade setup is as follows.
Buy if MA trades over $279.50 with a stop under yesterday’s low. Therefore, your stop is under $272.50, which is the 50-day average.
Fortunately, MA has a good options chain so rather than spending $280 on stock the November 300 calls will cost about $5.50.
If MA rallies to 290 over the next few weeks, these calls should double in value.
Please note, however, that if you do not understand options, this is not a good trade for you. Options can lose 100% of their value.
Therefore, MA trades below the stop level you should exit, or if the options lose half their value, you should exit.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation