AMT – Swing Trade the Breakout with Long Calls

Update 2

Out of this trade at $155.12, and sold just in time too. Return on investment for call options of %150. This was a big winner.

Update 1

Was maybe a little hasty entering this one. I entered when the underlying stock price was $150.8, but with elevated IV the contract price was $1.40. The trade turned against me almost right away. I was looking for a retest of soft support, but it showed signs of a next leg up before that happened. I was impatient and entered to early.

It closed higher than I wanted, but end of day action was bearish. The trade is now in a precarious position. If it dips too low in the morning it could cause a premature exit, and I fully expect a dip. For that reason, I think the stop loss of the underlying needs to be adjusted to $148.33 which is as low as it can go while keeping our thesis in tact. This would only be a 1.3% dip, but it could mean we lose more than half of our contract value. This is definitely a risk

All in all, there’s still a great risk/reward here for us in the trade. At this point, with our new stop loss, I stand to lose $190 but if it does in fact go our way we stand to make $400. It’s still wise to hold this trade, just an unfortunate entry! If it does retest $148.33, it would offer another great entry point. Maybe I’ll consider averaging down if the portfolio risk allows it.

Thesis

AMT is breakout out of it’s pattern on the daily chart which was a retracement to highs made on 9/1. I think it has more room to continue without consolidating. The weekly chart is reassuring and indicates a final price target of $156. We’re looking to get in on this quickly with a really tight bail out point to get out before the trade goes against us.

Trade Risk

Obviously this is entering over bought territory. However, RSI is high and increases which indicates that it may have enough momentum to carry through a little it. If it fact it does want to retrace, go sideways, consolidate, whatever we need to get out because our contract is going to be too short to withstand much of it. On the daily chart it created some soft support at $149.85 so on this first day we’ll have to watch price action careful to get out quickly if it’s going to dip much below this.

Contract

I’m already in the NOV 17 152.5C. It’s pretty close to the bailout point right now so I’m watching closely. I bought this a little early, but this would be an absolute gem to buy right now. I’m 30% down on this contract, but didn’t think it was going to touch this support level anytime soon. A minor error, but our play in this is for $5-6 of upside on the stock price, and at least doubling up on the contract value.

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