Can't deny the great trend happening with SPLS (Staples) right now. SPLS has gained a hefty 3% plus today in early trading, I'm expecting that to pull back a bit as investors take profits on a great day of trading. But I'm not as happy about the 3% day as I am with the trajectory of the stock price. Its been on a solid trend for months and continues to show breakout patterns that have held true. I'm watching for resistance around the $16.50 level but if it gets past that number it could be smooth sailing to around $19.00.
Today is a great example of how trading options can be a great way to make (or lose) money on strong trends. I am holding one Jan 2013 Option on SPLS with a $17.50 strike price. I got the option at $.80 / share and it is now trading at $.95 / share most of which came from today's move. With options you get rewarded, or destroyed, based upon momentum and a strong uptick in a positive momentum stock can mean big movement in the options. For example, a 3% move in SPLS stock price today gave a 26% gain in stock price today alone. Today's movement gave a $20 gain on an $80 investment.
Now my investment numbers are tiny because all I have is $1000 and a dream. But any investor with real figures to invest could have netted 26% gain on a relatively tiny 3% move. HOWEVER, the pendulum swings both ways. Getting in an option heading in the wrong direction could lose 26% on a 3% downward shift just as easily. That's why it is so important to pay attention to trends before buying, know the company, know the chart.
That being said I'm holding on to SPLS for the time being, I think the stock goes to $19.00. We'll watch it and see what happens. They are reporting 4th quarter results tomorrow, if it goes well - which I'm expecting - it could go even higher. The move today is likely the result of Office Depot reporting higher than expected numbers. Look for the same from Staples.
Disclaimer:
Just to be clear, nothing that I'm posting on this blog is in any way advice that should be followed by anyone else. All investment decisions should be made carefully by all individuals taking into account their own financial situation and appropriate levels of risk. Do not take anything I say for anything more than it is, opinion, speculation, and woefully undereducated guesses as to how I think a few stocks are going to perform.
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