DEO | Diageo DEO Trading Journal with VantagePoint

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. DEO is in focus today….

This journal entry looks at the recent market movements of Diageo NYSE: DEO

VantagePoint Trading Journal DEO

With all the negative news this week, it’s surprising that it was all much ado about nothing.  Getting a new Fed Chairman, seeing White House-affiliated indictments, and the announcing of a new tax plan by the House of Representatives all had little effect on the market. Using the artificial intelligence forecasting software VantagePoint, we can analyze individual stocks, futures or ETFs and broad indexes like the S&P, Dow, and the Russell. After utilizing our VantagePoint platform, I will entertain the possibility that we can go bullish or bearish from here. I would act on a strong signal in either direction. Let’s take a look at Diageo (DEO):

image of DEO trading diary with VantagePoint
DEO is in the midst of sideways movement, but a new crossover from VantagePoint on 11-1 indicates the potential for a new bearish swing.

Using the predictive indicators of VantagePoint, we will identify two things. The first is a bearish crossover indicated by the blue predictive indicator line crossing below the black simple 10-day moving average on 11/01/17. We also see 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. The move to the zero (0) position indicates weakness and further makes the case for a potential bullish scenario and makes me willing to entertain a setup to the downside.

Strategy Discussion

If you were a straight stock trader, selling DEO in the $135.00 area could prove to be prudent. This move anticipates a move to the downside. It would also be a conservative way to enter DEO without the limitation of time associated with other trading strategies. In this scenario, placing a sell-stop order in the $137.00 area to mitigate potential losses would also be important.

For those who trade options, DEO could also prove to be advantageous.  Due to the layered uncertainty in the market, I believe this market needs more time to realize gains. Going out to the regular December options could be the way to go.

From three simple inputs, we can compute the magnitude of the projected move through expiration.  Those three inputs are the underlying price, at-the-money implied volatility and the date of expiration. Performing this calculation for DEO yields a projected move of approximately $5.70 or 4.2%. This targets the $130.00 price level through the December expiration. Let us consider a possible bearish set up using the DEO December 130/135 put vertical paying $1.35. This will have a maximum risk of what one would pay for the spread, $1.35. The maximum reward will be the width of the spread less any premium paid, or $3.65. This yields a reward to risk ratio of 2.70:1.  Given the trading environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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tylerr@tradermarketinggroup.com'

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