We’re opening a new bullish trade on Lithia Motors Inc. (LAD).
Using the Technical Opportunity Screener from Profit Scanner, we’ve identified an ascending triangle on Lithia Motors’ chart.
The ascending triangle pattern was completed on February 26, when Lithia Motors closed above the resistance level of the pattern.
Based on the pattern, we expect Lithia Motors’ stock to rise to a target price range of $102 – $105 (as illustrated by the green dot in the image above).
Volatility on the stock is still relatively high, so the option premiums are a little elevated. However, compared to prior breakouts on Lithia Motors, the options are fairly priced near the current ask. We like the position following the recent release of positive consumer confidence. With confidence looking good, and gas prices relatively cheap, we think a long position like this on a used car dealer makes sense. The margins are attractive and growth on the distribution side of the auto-market has been unusually strong over the last two months.
Buy to open’ the LAD April 95 Calls (LAD150417C00095000) for a maximum price of $3.90.
InvestorPlace advisors John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.
You can learn more about identifying price patterns – like ascending triangles – and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.
