Left-for-dead 3D printing stocks are starting to percolate, and traders are taking note. Once upon a time top companies like 3D Systems Corporation (NASDAQ:DDD) and Stratasys, Ltd. (NASDAQ:SSYS) were all the rage.
The upside acceleration was glorious, the profits bountiful. Since the worm turned in early 2014, however, 3D printing stocks have been jettisoned from portfolios relentlessly.
While the good old days may remain a thing of the past, recent price action looks promising … finally. Perhaps the bulk of dejected shareholders have finally vacated the premises. Couple that with increased activity from bottom fishers, and the odds of a bona fide uptrend for the industry emerging remain high.
DDD stock has already completed its upside reversal, providing a road map for SSYS stock to follow. Stratasys has been quietly coiling for six months now. The range has been narrow, particularly compared to how much the stock usually jumps around. Remember, stock volatility moves in cycles.
Volatility compressions (the likes of which SSYS has seen) inevitably give way to some type of volatility expansion. A breakout, in other words.
And if its peer, DDD, is any indication, an upside breakout for SSYS seems likely. I particularly like the volume patterns of late. Accumulation days are multiplying while distribution days are largely absent.
The SSYS Trade
A breach of the $24 zone is as good a trigger as any for bullish Stratasys trades. Implied volatility remains subdued suggesting long option plays are the way to go. Let’s keep this one simple.
Buy the Nov $22.50 call option for $2.45. The long call provides unlimited reward for the next two months should SSYS really get uppity. The max risk is capped at the initial $2.45 and will be forfeited if the stock sits below $22.50 at expiration.
Traders looking to further reduce the loss could exit if the stock breaches the 50-day moving average currently perched at $21.50.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
