Boeing shares are up 17 percent year to date, but rather than taking the rally as a sign to get out, one trader who relies heavily on the technicals is betting it could hit all-time highs in the next few weeks.
"Boeing has been consolidating since February," said Tradinganalysis.com founder Todd Gordon. "I think the stock is going to poke through this resistance level and could make a move up to $165." The aerospace company's shares have fallen nearly 2 percent in the past month.
According to Gordon, there's one catalyst that could put a pause in the component's attempt to break out to new highs: earnings later this month.
"We have earnings coming up April 22," he said on Thursday's "Trading Nation." "You can either do a trade a couple of months out to weather some of the volatility that comes along with the earnings, or you can make a shorter-dated trade to be out before earnings," Gordon said. "I'm doing a trade that gets me out before earnings on the 22nd."
So to make a short-term bullish trade, Gordon sold the April 17 monthly 149/147 put spread. Specifically, he sold the 149-strike puts and bought the 147-strike puts for a 24 cent credit. "The most I can make on the trade is 24 cents, but I'm risking $1.76," said Gordon. "The reason for this skewed risk and reward ratio is the probability of success. My breakeven on this trade is $148.76, which the options market is pricing in as an 80 percent chance of success."
When traders sell put spreads, they are making a moderately bullish bet that a stock will rise. The trade is basically a bet against time, with the goal of having the stock stay about the strike of the put that was sold by expiration, which in this case, is about two weeks.
"This is a directional bet, not a bet on decreased volatility because heading into earnings we expect volatility to go up a bit," Gordon added. "But the stock looks strong here."
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