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A Bullish Setup In Diageo

by
February 2, 2018 12:39 pm
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VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, forex, ETFs and cryptocurrencies. 

The VantagePoint Trading Journal On DEO

VantagePoint recently indicated a potential downside breakout in Diageo plc (ADR) (NYSE: DEO) due to a bearish crossover on Jan. 26. 

deo.png

Using the predictive indicators within the VantagePoint platform and its predictive AI technology, we can point out two significant things. First, we have a bearish crossover indicated by the blue predictive indicator line crossing below the black, simple 10-day moving average on Jan. 26. We can combine that with the VantagePoint propriety neural index indicator turning green. This indicator measures strength and weakness for a 48-hour period. The move to green position indicates weakness, and further makes the case for a potentially bearish scenario. That’s why one could consider entertaining a setup to the downside.

Strategy Discussion

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

The sale of a credit call spread may be one way to approach this situation. It is optimal to collect the most premium in an options set up like this. Selling a strike close to at-the-money and buying a further out call as protection could be most prudent. Consider the sale of the monthly March 145/150 call spread collecting $1.50. This will yield a risk to reward ratio of laying odds of 2.33:1. This is calculated by taking the width of the spread. And then less any premium collected and dividing by the premium collected.

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

VantagePoint is an editorial partner of Benzinga


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