A mostly supportive 2016 on the DDD stock chart suggests investors can start building positions and look to print money once more in 3D Systems Corporation (DDD).
HP Inc (HPQ) is finally in the 3D printing business. Tuesday marked the big day for the venerable computing hardware outfit, much to the chagrin of rival DDD — or so we’re told.
Despite HP rolling out its HP Jet Fusion 3D Printing Solution — a product two times cheaper and 10 times faster than any DDD’s offerings — it was DDD that investors appeared more confident in.
In a difficult session for the broader market, shares of HPQ finished lower by 0.95%. At the same time DDD stood out with its gain of 0.87% and hold of key technical support.
One day doesn’t make a trend for 3D Systems, but nevertheless, this strategist is hopeful a turnaround is in play in shares of DDD following its massive two-year, 90% fall from grace.
Under new leadership from one of HP’s brain trust, and with a fresh commitment to healthier and more dynamic business markets and a stock showing strong signs of life in 2016, current prices in DDD look ripe for bullish contrarian positioning in 3D Systems.
DDD Stock Daily Chart
As noted, one day doesn’t make a trend. Having said that, shares of DDD have managed to put together a much more bullish chart in 2016 and one poised to continue higher.
From a two-year and bear market low established out the gate this year, DDD rebounded to gains in excess of 200% into late April. The price action also brought about other positive developments worthy of a new trend being underway.
During DDD’s rally, shares managed to break a long-standing downtrend and move above its long-term 200-day moving average for the first time in two years.
The same constructive price action also allowed for a bullish Golden Cross to signal as the 50-day simple moving average aligned itself above the longer-term average.
Currently and following corrective action in DDD over the past couple weeks, traders bullish on 3D Systems’ turnaround prospects have an opportunity to buy shares at key support.
The technical area is defined by the 50% – 62% retracement levels, 200-day SMA and Golden Cross signal level in DDD.
DDD Long Bull Call Spread
Reviewing DDD’s options board, the June $14/$15 bull call vertical for 30 cents is attractive.
For 30 cents the trader has the opportunity to capture 70 cents, or 233%, at expiration if in the next month shares can rally above $15, or roughly 17%.
Given the magnitude of DDD’s pullback, profit maximization is still well below a recent high of $19.76, which makes the position a more compelling proposition.
Also of benefit, the softer directional spread maintains less Greek risks than being long an outright long call in 3D Systems. Lastly, compared to an out-of-the-money bull put spread, the call spread makes more sense (and cents) in the event the defined key technical support zone doesn’t hold.
Bottom line, while we like the prospects for a turnaround, the DDD chart does point at a line in the sand and one which we’d rather not lose our shirt over should a bearish turn for the worse be in the cards.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
