Mobileye NV (NYSE:MBLY) is on the move after Goldman Sachs issued an upgrade of MBLY shares. The bears driving MBLY stock into the ground were finally booted from the vehicle, putting buyers behind the wheel. Now, with the technicals turning higher, the time for bullish plays is here.
Like many equities, the turn of the new year brought renewed strength for MBLY stock. In four days the Israeli-based technology company soared 20%, breaching numerous resistance levels in the process.
First to cave was the descending trendline, which defined Mobileye’s downtrend since it peaked in mid-August. Then the falling 50-day moving average fell prey to the bullish onslaught. Next came the horizontal resistance level carved out from the failed rally in November. And finally, the 200-day moving average was shattered.
Click to Enlarge
Couple the price advance with the massive volume revealing institutional accumulation, and an upgrade at Goldman, and we have a bona fide trend reversal on our hands. The price pop is carrying shares above yet another resistance level at $43.
Consider buyers in complete control as long as MBLY stock sits above the new support pivot at $39.50.
The MBLY Stock Trade
If you’re looking to capitalize on continued strength out of Mobileye, consider buying bull call spreads. To allow ample time for the stock to rise we’ll use March options.
Buy the March $44 call while selling the March $48 call for a net debit of $1.50. It’s a cheap trade that allows you to nearly double your money if MBLY goes the distance in the coming months.
The max risk is limited to the initial $1.50 debit and will be lost if the stock sits below $44 at expiration. The max reward is limited to the distance between strikes minus the net debit, or $2.50, and will be captured if the stock can rally to or above $48 over the next two months.
At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.
