The news acted as a much-needed catalyst for DDD stock, which has otherwise had a horrendous year. After climbing an impressive 160% last year, the popular momentum darling finally succumbed to gravity in recent months by giving back the entirety of 2013’s gain. Even after Monday’s pop, DDD stock still is down 59% year-to-date.
Although yesterday’s surge accomplished little in turning the long-term downtrend in DDD, it did lead to a reversal in its short-term trend. A brief survey of its chart reveals two positive developments:
- First, DDD stock now sits above its 20-day moving average for the first time since mid-September.
- Second, the stock has now broken out of a bullish falling wedge pattern, suggesting at least a short-term low may now be established in the stock.
Given the plethora of overhead resistance in DDD, its current recovery attempt likely will be a choppy endeavor. It’s tough to read too much into any one day’s movement, but the bulls did at least establish a foothold with Monday’s breakout.
The options market provides a number of ways to position yourself for at least a short-term low in the stock.
How to Trade 3D Systems
Due to its cheaper price tag, DDD stock is a good candidate for a short put play. Bulls on the stock should consider selling the Dec $35 put for 75 cents or better. Think of it as a bet that the 3D printing company remains above $35 by Dec expiration. Currently the options market is pricing in about a 75% chance of that happening. The max reward is limited to the initial 75 cents.
By selling the put you obligate yourself to buy the stock at $35 (though with the 75-cent credit, your cost basis would actually be $34.25).
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
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