"Buy Zone" Alert for UL stock

October 19th, 2020 "Buy Zone" Alert for UL stock Dear Reader, For today's Trade of the Day we will be looking at a Keltner Channel chart for Unilever PLC stock symbol: UL. Before breaking down UL's daily Keltner Channel chart let's first review which products and services are offered by the company. The Unilever Group, together with its subsidiaries, operates in the fast-moving consumer goods industry worldwide. It operates through three segments: Beauty & Personal Care, Foods & Refreshment, and Home Care. The Beauty & Personal Care segment offers skin care and hair care products, deodorants, and skin cleansing products under the Axe, Clear, Dove, Lifebuoy, Lux, Pond's, Rexona, Signal, Suave, Sunsilk, TRESemme, and Vaseline brands. Now, let's begin to break down the Keltner Channel chart for UL. Below is a Daily Price Chart and the three Keltner Channels for UL stock.

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock's daily stock price is trading above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement. Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, it's price will typically decline soon after as the inevitable profit taking occurs. The UL daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as UL has traded above the Upper Keltner Channel on multiple occasions recently. But, in every scenario when UL became overbought, the stock quickly soon after experienced a pullback. Buy Unilever Stock Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point. The Keltner Channel "Buy Zone" occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower-risk buying opportunity and the stock should be purchased. Our initial price target for UL stock is 65.28 per share.

107.9% Profit Potential for UL Option Since UL's share price is currently below the upper Keltner Channel, this provides a lowered risk entry point for purchasing a UL call option. Let's use the Hughes Optioneering calculator to look at the potential returns for a UL call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat UL price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following UL option example, we used the 1% Rule to select the UL option strike price but out of fairness to our paid option service subscribers we don't list the strike price used in the profit/loss calculation. Trade with Higher Accuracy When you use the 1% Rule to select a UL in-the-money option strike price, UL stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if UL stock is flat at 62.76 at option expiration, it will only result in a 5.2% loss for the UL option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price will result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks. The prices and returns represented below were calculated based on the current stock and option pricing for UL on 10/16/2020 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price. For this specific call option, the calculator analysis below reveals if UL stock increases 5.0% at option expiration to 65.90 (circled), the call option would make 51.3% before commission. If UL stock increases 10.0% at option expiration to 69.04 (circled), the call option would make 107.9% before commission and outperform the stock return nearly 11 to 1. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify winning trades just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Chuck's Inner Circle Trading Service Chuck is offering special pricing for his Inner Circle Trading Service for Trade of the Day subscribers. You can start receiving hand-picked trades from Chuck today! Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing! Wishing You the Best in Investing Success,

Chuck Hughes Editor, Trade of the Day

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