The seemingly inevitable rendezvous with zero for shares of LendingClub Corp (NYSE:LC) has been put on hold, perhaps indefinitely.
Shares of the peer-to-peer lending company popped 7.3% yesterday amid heavy trading. And it wasn’t just a one-off — LC is closing in on a 100% gain since bottoming mid-May at $3.44.
While much work remains before LendingClub’s long-term downtrend can be turned, buyers have established a foothold worth bragging about. Perhaps most impressive is the shift in volume patterns transpiring in recent months. May’s death spiral was accompanied by epic volume and reeks of capitulation.
Since then, distribution days have all but dissipated while accumulation days (high-volume up days) have begun to multiply.
Another victory of note is LC stock’s breach of the trendline that has defined its descent since the personal finance company went public in late 2014. The fact that LendingClub shares were able to vanquish such a long-standing resistance level suggests its current rally is the real deal.
Selecting an upside target for LC in the days ahead is made easier by the fact that two key levels currently rest in the exact same spot: the gap fill area from May’s swan dive as well as the 200-day moving average both sit near $7. With LC stock currently perched at $6.17, that means traders are looking at 83 cents of potential upside.
The LC Stock Trade
Though LendingClub has listed option contracts, venturing into the derivatives market to play a $6 stock seems silly. At $6, LC effectively is an option contract. A long call to be exact, one without an expiration date.
No need to muddy the waters with this one. If you think buyers keep jamming into LC, snatch up the stock. A break of $5.25 would sour my outlook, so consider using a breach of that level as a signal to exit. Otherwise, look for continued strength to carry shares to $7 and beyond.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
