×

This surging Dow stock has more room to run: Trader

One of the best-performing Dow stocks of 2016 has more room to run, says one savvy trader.

Andrew Keene of AlphaShark sees a big rally in the charts for IBM, a stock that's already up more than 12 percent year to date. The computer hardware mainstay hit a year-to-date high of $163.53 in August, but has since dropped slightly and stayed under $160 since September.

But looking at a daily chart of IBM, Keene sees the stock moving toward its 150-day moving average, in line with IBM's end-of-June low that later saw the stock catapulting upward during July.


How high can IBM move? On a weekly chart of IBM, Keene also sees the stock close to hitting its 150-week moving average. As Keene sees IBM making a move up, he believes that the stock can actually retest its 50-week moving average around $165, a level that allows him to set up a trade.

"We have a measured move target to the $165 level, and that's where I think IBM is heading by November," said Keene on CNBC's "Trading Nation."

To play for the move higher, Keene purchased the November 160/165 call spread for $1.10. This is a bet that IBM will rise above $161.10 by November expiration.

"On this trade, if it goes to my measured move target of $165 by expiration, I can get 500 percent return," said Keene. "That $110 will turn into $500. If it sells off, the most I'm out is that $110."

IBM has dropped about 5.5 percent since hitting its 2016 highs in August. Keene is betting that the stock will rise more than 7 percent for his trade following its earnings report next Monday.


Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect