I was recently scanning the market and came across a great-looking stock chart: Meta Platforms Inc. (META). Since META’s 1-month price was trading above the 10-month SMA, signaling a PowerTrend “Buy,” this was offering an attractive trading setup in the options market, observes Chuck Hughes, co-founder of Hughes Optioneering.
Below is a snapshot of META’s stock chart. Let’s dive in so I can show you what made me stop scrolling when I saw this chart.
When I looked, I saw that back in January 2023, META shares experienced a bullish breakout to the upside. It generated a brand new technical signal for the stock. At the time, its 1-month price finished the month trading above the 10-month SMA and following my PowerTrend system, this qualifies as a “Buy” signal for the stock.
Now, you may ask yourself: “Well the buy signal occurred in 2023, have I missed the chance to trade this?” Don’t worry – because we still have an opportunity to take advantage of this stock’s move, and I’ll tell you why.
This crossover indicated the buying pressure for META stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend. And as you can see, the 1-month price is still above the 10-month SMA. That means the bullish trend is still in play!
When stocks break out to the upside like this, the bullish trend can often last longer than one might think. One way to trade META’s trend and have the opportunity to capture some profits is by using options.
Recently, a call option debit spread for META would allow you to gain some exposure to the stock’s powerful bullish trend, but also have some downside protection built in as well. Once I place a call option debit spread, it has the ability to profit if the underlying stock is either up, flat, or even down a bit at option expiration.
