Dell Emerges as Rare Bright Spot in a Rough Tech Market: How to Trade It
With Dell bucking the tech downturn and pulling back near support, this options trade offers a way to participate and limit downside risk.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Dell Technologies
After a bludgeoning month for technology names it is hard to find any charts that are in bullish condition. We did find Dell Technologies (DELL) as one that has simply defied the market trend, which is down.
The stock bolted higher following a stellar earnings report and boosted guidance. It seems the stock has acted much differently than others in its space following a strong report. Perhaps investors are seeing through the bad market conditions and are looking at a gem in Dell.
Whatever the case, the DELL chart is strong and a recent pullback may not be over until the November highs at $167.50 are tagged. That should be strong support but it if does not hold there is room to fall sharply. The chart shows a stock in a strong uptrend, higher highs and higher lows, bullish money flow and MACD on a buy signal.
We could look at an options trade here that goes out to June. That's plenty of time to wait through any volatility and if the market does turn upward the money should flow to strong names like Dell.
A June monthly 170 call looks pretty attractive here, with good open interest, a delta of 0.54 (moderate risk) and an earnings report due in May, so that implied move is being priced in.
This is why the cost of the option at $20 is about 12% of the stock price. That seems attractive as we think the stock might make a run to $200 in the short term, which would mean this option would be nicely profitable.
