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Shares of Wal-Mart Stores (WMT) could be on the verge of falling below their 50-day moving average as long as $69 holds. With the stock trading higher today, I want to use put options to play the backtest.
Buy to open the WMT May 65 puts (WMT160520P00065000, $0.70, down $0.20) at current levels
Shares have traded to a high of $68.76 today, but resistance is at $69. A move above this level could lead to $70 or higher, which would cause some concern for the trade. Support is at $67.50.
Earnings for aren’t due out until mid-May, so the headline risk of this event likely won’t be in play unless we are still in the trade at that time. I’m looking for WMT to make a drop below $65, which is where we can start locking in profits over the next few weeks.
My Exit Target for the WMT options is $1.50, and I do not have a stop loss in place at the moment.
But keep in mind that the Exit and Stop Targets are just targets that I use to set the parameters. At times, I will adjust them for my Momentum Options members and make them Limit Orders or Stop Limit Orders, which is when I suggest that traders follow them within your brokerage account. They help protect profits and limit losses. Once they are set, your orders are automatically executed.
This is a big help in case you are busy at the time these orders trigger. When they do trip, I always send Momentum Options traders a Trade Alert to keep them updated on the action.
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