Friday, May 15, 2015

WDC Call Option Order - 400% to 700% Gain Potential Going Into July Expiration

Click on Chart to Enlarge

I have an order to purchase July 100 calls on WDC tomorrow for 2.90 or less and the July 105 calls for 1.25 or less GTC.

There is a very nice price logic set up coming down off the winter high relative to the fall Oct 15 low.  There was a very nice dual time frame stochastics buy signal at point C with the daily chart showing bullish divergence while the weekly was oversold.

Then the downtrend line for the correction was broken with a small gap up and many technical indicator buy signals were given in the brief run up to follow.  After the brief run up, a minor correction occurred bringing price right back down to the break out point of the trend line.  This coincided with the average retracement level where a stochastics < 50 signal will occur after a pattern like this breaks out from a completed bottom.

Additionally, the April earnings announcement occurred during that pullback and price held support on the gap down and has since risen.  So the earnings announcements are out of the way until the summer.

Based on the typical projection for the price rise to follow such a pattern, we could expect price to exceed the winter high at the $114 level by July expiration or sooner.

If the move up which is beginning now makes a wave 3 type Elliott wave move and is 161.8 times the size of the initial move up from point C, then that would also project to the winter high around $114.  And if it does unfold like a wave 3, it will be very directional and would produce a 400% gain and 700% gain or more on the options respectively.

So, with the broad market near new all time highs, it will be interesting to see if it breaks out and continues, with the Nasdaq eclipsing to 2000 high finally.  If so, it would bode well for WDC to carry higher as this pattern moves forward.


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