Riding The Wave With United Continental

Mexico sees diminishing chances for a new NAFTA deal ahead of tomorrow’s deadline – given by U.S. House Speaker Paul Ryan – that would allow for the pact to be approved before a newly elected Congress takes over in January.

North Korea is expanding on its threat to cancel the June 12 summit between Kim Jong-un and President Trump.

*Source:  Seeking Alpha

This type of news tend to be shrugged off, but I am looking for strong signals to the upside with the VIX still hovering around 13.50

We turn to United Continental Holdings today (ticker: UAL):

The VantagePoint platform recently indicated a potential upside breakout in UAL could be forming due to a bullish crossover between 5/14/18 and 5/15/18.

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 between 5/14/18 and 5/15/18. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position four days earlier.  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. Additionally, we see that the predicted high and low for today’s range is above the actual high and low from yesterday’s session.  I want to play the VP bullish indication.

Strategy Discussion

For more 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.  The first thing you want to do is calculate your target strike.  In order to do this, you need three pieces of information:  current price, date of expiration and at the money implied volatility for that expiration.  For UAL, this calculation targets the $72.00 strike.  You may want to consider buying the June 1st weekly expiration 70.5/72 call spread paying $0.30.  The maximum risk is what you paid for the spread and the maximum reward is the width of the spread less any premium paid.  Max risk = $0.30, max reward = $1.20 which yield a reward to risk ratio of 4:1.

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