DailyPlay – Opening Trade (MDT) – November 28, 2022

MDT Bullish Opening Trade

View MDT Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 10 Contracts Jan 20th $80/87 Call Vertical Spreads @ $2.03 Debit.

Total Risk: This trade has a max risk of $2,030 (10 Contracts x $203).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend.

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 113

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Medical device maker Medtronic (MDT) has had nothing but hard times in the past 15 months, being in a straight down bear market since its all-time high of Summer 2021. As bulls have continuously lost money, I’ve read that CNBC’s Jim Cramer “no longer recommends the name”. That’s the type move and public commentary that can really wash out what is already a badly beaten down name.

With that in mind, here’s what I see: Last week’s low bounced on the same level of what was the lowest Friday close of 2020 ($77.46), when the Covid sell-off crushed global equity markets. (I’ve displayed that line on the weekly chart below.) In addition, that same low also bounced on the recent weekly -13’s Risk level of $77.24. to me, this sets up a bullish counter-trend trade worth putting on. As such, let’s look to buy the Jan. 20th $80/$87.50 call spread today. On Friday, the spread closed at $2.03 mid, which represents about 27% of the strike differential – a very agreeable cost to absorb from an expiration that has just north of 50 days to go.

MDT – Weekly