MRNS – Calls for Cup and Handle Breakout

We’re going to look for MRNS to pop out of this breakout level, and ride it to about $10.50. This is my 11th trade of the $1,000 to $10,000 challenge. If you’d like to join a great chat group, hit me up on StockTwits, jbabin387.

Thesis

MRNS has shown strength over the past couple months, nearly doubling in value. After becoming overbought, it demonstrated a healthy retracement and formed a nice looking cup and handle. It has tried to pop once in a low volume premarket session, but failed and formed a new support level that it has touched twice. We’re looking for it to touch a third time and to enter this trade for the next breakout attempt. Should it breakout, the next resistance level is at $10.68 which will be our price target.

Trade Parameters

We are looking to enter the 15 DEC 10C. Our entry and exit timing is very easy on this trade. On a touch of $7.37 support, we go long with call options. On a drop to about $7.20 we exit the trade on a broken thesis. If the trade pops before we can enter, we’re going to look to get in around $8.50 for confirmation of breakout. If the trade pops after we enter, we’re looking to exit around $10.50.

Trade Risk

Price action isn’t a big risk in this trade because it’s going to be very clear when we should exit on bad action. However, options do not appear to be super liquid, and have a wide bid ask spread. The ITM options are not much better than the OTM in this case. So, when we enter the trade, we want to make sure that we’re going to be able to get in below the mid point, which is often times possible in these situations. If we can’t get a good price, we’re going to skip this trade all together.

We also face overall market risk. Watch the price action vs the SPY.

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