Trade of the Day: GT Advanced Technologies (GTAT)

by Ken Trester | February 14, 2014 9:34 am

The stock market continued to rebound on Thursday from their early-year selloff, and our indicators are improving as a result.

Our index indicators are giving bullish readings, an upgrade over last week’s bullish to neutral. But the bullish readings are only as good as the Dow Industrials, which only yesterday crossed back above their 50-day moving average. The Dow needs to stay above 15,980 to maintain the primary bullish trend. The S&P 500 needs to stay above 1,800 and the Nasdaq must remain above 4,100 in order for those indexes to maintain their primary bullish trends.

Our internal indicators are reflecting the improvement shown by the major indexes. The Advance/Decline Index remains bullish and the Cumulative Volume Index has returned to bullish territory. And perhaps the most interesting development, the 200-day Moving Averages Index has crossed back above not only its 50-day moving average, but its 200-day moving average as well, upgrading its reading from bearish to bullish/neutral. Additionally, seven of the nine major S&P sector funds are now bullish, a huge upgrade from the two of nine a week ago.

Long-term Treasury bonds (TLT[1]) continue to pull back from a recent high made above $109, but TLT remains above its 50-day moving average, which is at $105.50. The strength in Treasuries has been the result of a flight to safety due to potential trouble in emerging markets, as well as unexpected weakness in the U.S. economic reports. Many analysts attribute the weakness to harsh winter weather, so it could be a couple more months before we get an accurate reading as to the true state of the economy, which in turn will be reflected in Treasury prices and interest rates.

With our stock market indicators showing improvement over the past week, options traders should begin to lean more toward bullish positions such as buying calls. But don’t go overboard, as much of the market’s improvement has been the result of a bounce off of oversold conditions. Stick to select bullish positions.

I have interesting idea to bring you today: GT Advanced Technologies (GTAT[2]).

This big-cap tech stock provides crystal growth equipment for solar, light emitting diode (LED), and electronics industries across the globe. On Wednesday, GTAT shares fell by over 7% on the day, which sets traders up to enter these calls very cheaply.

Buy the GTAT June 14 Calls at $1.10. After entry, take profits if the stock price hits $13.60 or the option price hits $2.00. Exit if the stock price closes below $10.80 or the option price closes below 80 cents.

The company reports earnings Feb. 24, and while stock market analysts are prepared for a loss, this means that even the slightest positive surprise could send the stock soaring.

InvestorPlace advisor Ken Trester[3] brings you Power Options Weekly[4], which delivers 5 new options trades to you each Friday. It’s the perfect ‘bridge’ between investing in ordinary stocks and the turbocharged world of options trading. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95[5].

  1. TLT:
  2. GTAT:
  3. Ken Trester:
  4. Power Options Weekly:
  5. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95:

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