Trade of the Day: iRobot (IRBT)

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iRobot (IRBT) is showing strength and could be setting up for a run to fresh 52-week highs. The company is also one of my favorite takeover targets for 2016, and it is a name I have followed for years.

A run past $36 to possible fresh 52-week highs could be in play for IRBT given the recent strength in the chart. Shares traded to a $34.13 on Thursday and up to levels not seen since late April.

The next layers of resistance for IRBT are at $34.50-$35. A golden cross is 32 cents away from triggering with the 50-day moving average on track to clear the 200-day moving average in the coming days.

Support is at $33.50 with $33 serving backup. To play this momentum in IRBT, I suggest the following:

Buy to open the IRBT January 34 calls (IRBT160115C00034000) at current levels.

I like these call options at current levels, and you can use a Limit Order up to $1.35 to get the best fill.

My exit target for the options is $2.20, and I do not have a stop loss in place at the moment.

Looking at this trade against the backdrop of the broader market, here’s how I see the major indices shaping up in the short term:

The Dow blue-chips slipped but support at at 17,400 held. The bulls pushed a late day high of 17,697 but failed resistance at 17,700-17,800.

The S&P 500 flirted with near-term support at 2,040 following the test to 2,045 on the open. The bulls managed to reach a peak of 2,067 late in the session but hardly challenged resistance at 2,075-2,080.

The Nasdaq fell but support at 5,000 easily held. The late day run to 5,075 tested upper resistance at 5,075-5,100. The close below 5,050 keeps me slightly cautious. A close above 5,100 ahead of the weekend would be a possible bullish signal for next week.

The Russell 2000 small-caps were flat throughout the first half of trading but held positive territory following the two-point pullback to 1,144. Support at 1,140 held strong before the rebound to 1,154. Resistance at 1,150-1,160 held into closing bell with a move above the latter being a bullish setup.

The S&P 500 Volatility Index ($VIX) traded in negative territory for much of the session despite the midday move to 19.72. Resistance at 20 held before a close below this level. The bulls pushed a low of 18.13 ahead of the close but needs to get below 17.50 ahead of next week’s Fed meeting.

FED ALERT:  Prepare Now for Next Week’s Big Move

Next week’s action will tell us whether we’re headed for Dow 19,000 or Dow 16,000. Either the market likes what it hears from Yellen & Co., the VIX gets back under 15 and the market explodes to new highs…

Or the market panics about rising rates, the VIX breaks above 20 and the markets crash through key support levels in a hurry.

But you can rack up triple-digit profits either way. Click here to see how…


Article printed from InvestorPlace Media, https://investorplace.com/2015/12/irbt/.

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