The stock market is greeting investors returning from the holiday break with yet another rally into record territory, and one stock benefiting from the buying bonanza is LinkedIn Corp (LNKD).
If last year’s playbook is any indication, buyers will likely continue bidding the market higher into year-end. Perhaps the most notable development to the bullish festivities was the recent breakout in the land of small caps. The popular Russell 2000 Index jumped to a new all-time high last week finally exiting the trading range that has defined it all year long.
As far as LinkedIn is concerned: LNKD stock is boasting a number of bullish developments, among them:
- The intermediate-term price trend in LNKD stock is pointing higher, and thanks to the pre-Christmas pop in the stock, its short-term trend is now rising. Once it breaches near-term resistance at $238, its all-time highs at $258 should act as a magnet.
- The volume patterns in LNKD are soundly in favor of the bulls. The last two surges have been accompanied by high volume while the subsequent consolidation phases have experienced lower-than-average volume. Look into the face of LinkedIn and you’ll see “accumulation” stamped across its forehead.
- The chart pattern forming in the stock lends itself well to a low-risk, high-reward entry point. As a trigger for its next advance watch for a breakout over the $238 zone.
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How to Play LNKD Stock With Options
Traders looking to profit from the next rally in LNKD could purchase the Feb $240/$250 call spread for $3.90. The spread consists of buying to open the Feb $240 call while selling to open the Feb $250 call. The trade is designed to profit handsomely if LNKD can indeed rally back to its all-time high over the next two months.
The risk is limited to the initial $3.90 paid at trade inception and will be lost if LNKD stock remains below $240. The reward is limited to the distance between strikes minus the net debit, or $6.10, and will be captured if LNKD can climb above $250.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
