DailyPlay – Opening Trade (PDD) – June 24, 2024

PDD Bullish Opening Trade Signal

Investment Rationale

In the current environment, it’s hard to find valuation bargains with growth stocks, but PDD stands out from the rest. With fast growing multi-national eCommerce brands, PDD is generating substantial cash flow yet trades at a substantial discount and presents an attractive investment opportunity. 

Technical Analysis

PDD has been trading in a range between $110 and $150 and recently the price action suggests a potential breakout above its $150 resistance level. After breaking out above a minor resistance level at $138, its pulled back to retest as support and the risk/reward favor adding long exposure at these levels to setup for a potential breakout. 

PDD – Daily

Fundamental Analysis

Trading at 12x forward earnings, it almost looks like a mistake when you consider the industry leading 26% Net Margins and the 40-50% EPS and Revenue growth analysts are expecting over the the next few years. This represents a substantial discount to the multiples that fast growing companies typically would trade for. 

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 4 Contracts August 2nd $143/$135 Put Vertical Spreads @ $2.98 Credit per Contract.

Total Risk: This trade has a max risk of $2,008 (4 Contracts x $502) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $502 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is trading higher and recently found a new level of support.

1M/6M Trends: Mildly Bearish/Bullish

Relative Strength: 4/10

OptionsPlay Score: 93

Stop Loss: @ $5.96 Debit. (100% loss to the value of premium received)

View PDD Trade

Entering the Trade

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

PLEASE NOTE that these prices are based on Friday’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. 

View PDD Trade