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 and ETFs. Financial Institution H&R Block, HRB Stock, is in focus today…
This journal entry looks at the recent market movements of H&R Block on the NYSE: HRB
VantagePoint Trading Journal HRB
Yes, the markets are open today, but you would hardly know it. The week between Christmas and the New Year tends to be a sleepy one. Filled with tight ranges and low volumes. So far, we are seeing that the global markets are largely unchanged and a US Stock market looking to open flat. You never know though.
Even in markets like these the opportunity still awaits. The number one rule in a week like this is to allow yourself NOT to trade unless the opportunity presents a clear path to profitability. You may have to hold a position a bit longer than you are accustomed to and you should expect to trade less than normal. That doesn’t stop one from looking though. Due to the seemingly randomness of a market like the one before us, one could rationalize entertaining a potential bullish or bearish breakout. Today we focus on financial company H&R Block (HRB): Here’s the chart:
The VantagePoint platform recently indicated that a potential downside breakout in HRB could be forming. This is due to a bearish crossover on 12/21/17.
Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bearish crossover indicated by the blue predictive indicator line crossing below the black, simple 10-day moving average on 12/21/17. We can combine that with the VantagePoint propriety neural index indicator moving from the one (1) to the zero (0) position. This indicator measures strength and weakness for a 48-hour period. In this case weakness. The move to the zero (0) position further makes the case for a potential bearish scenario. That’s why one could consider entertaining a setup to the downside.
If one were a straight stock trader, simply selling (shorting) HRB in the $26.50 area could prove to be prudent. You are anticipating a continuing move to the downside. It’s also a conservative way to enter HRB without the limitation of time associated with other strategies. In this scenario, it would also be good practice to place a buy-stop order in the $27.30 area. This will mitigate potential losses.
For more active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking a passive approach may be the best path to success. In the case of a passive approach, you allow yourself a number of potential outcomes that can eventually lead to a profitable trade instead of relying on just one outcome.
Because of the reasons given above, the sale of a credit call spread may be one way to approach this situation. To collect the most premium, one may want to sell a call spread as close to the money as possible. We can consider selling the January 27/28 call spread that is trading $0.30. This will yield a risk to reward ratio of 2.33:1. This ratio is calculated by taking the width of the spread less any premium collected (1.00 – 0.30) and then dividing that number by the amount of premium collected (0.30). $0.70 divided by $0.30 = 2.33.
Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.
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