MasTec Has the Wind At Its Back

Argentina’s peso tanked 7.5% against the dollar on Wednesday, bringing losses to nearly 50% over the past year, after President Macri asked the IMF to speed up delivery of a $50B bailout package. It was the largest one-day decline since the currency was allowed to float in 2015, prompting central bank interventions and investor concern that the third-largest Latin American economy may not meet its debt obligations.

*Source:  Seeking Alpha

Let’s consider MasTec, Inc. (Ticker: MTZ):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on August 29th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN two days before.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP continued bullish indication.

Strategy Discussion

If you are strictly a stock trader, simply buying MTZ in the $45.25 area is a prudent move.  You are anticipating a move to the upside.  It is always a good idea to enter a sell-stop order to mitigate potential losses.  Placing that sell-stop in the $43.00 area will achieve that goal.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For MTZ, that yields a target strike of ~$48.  You may want to consider the MTZ September 21st regular monthly expiration 46/48 call spread, buying it for $0.43.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.43 and max reward = $1.57. This means that you are getting odds of 3.65:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

Position Update

You will recall that we identified, using the VP platform upward, bullish momentum in Momo Inc. (Ticker:  MOMO).

Specifically, we highlighted how buying the September 21st monthly expiration 47/50 call spread for $0.80 could take advantage of this bullish indication.  We did in fact enter this indication on 8/23 and using the risk management tools embedded in the VP platform, we saw this bullish momentum waning on 8/27 and prompted an exit at $1.25 to realize an ROI of 56.25%.