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. DPZ stock is in focus today….
This journal entry looks at the recent market movements of Domino’s Pizza NYSE: DPZ
VantagePoint Trading Journal DPZ Stock Update
You may recall that an upside breakout was indicated by the VantagePoint platform in Domino’s Pizza (DPZ) on 12/1/17. We also noted how an options trader could enter the January 185/190 call vertical and pay $1.20. The VantagePoint platform did indeed call that upside breakout quite well. Here’s the chart:
Although the upside call was a correct one, the momentum has since waned along with the rest of the market and it could be prudent to take profits here. The spread could have been entered for $1.20 and exited on Thursday 12/14/17 for $1.90. This is a prime example of prudent position management. Even though one’s personal profit target may have not been reached, market conditions force one to be prudent and agile. This still affords a trader a ROI of 58.33%.
VantagePoint Trading Journal DPZ Stock
An interesting Friday set up an active close to the week. The market is backing off highs seen in the previous session as the Senate tax bill ran into significant hurdles. With concerns over the deficit, it’s now possible that deep tax cuts might have to be moderated, future tax increases might be built in and that some conservatives might seek to attach spending cuts. In addition, we have the guilty plea of National Security Advisor Michael Flynn in conjunction with Robert Mueller’s Russia investigation.
Taking this news into consideration, the VantagePoint platform provides potential and direction for us using the powerful tools at our disposal. 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 am continuing to look for value plays to the upside in strong, wide-reaching sectors. Any overreaction to the market elements outlined above is most likely an opportunity to the upside. DPZToday, Domino’s Pizza (DPZ) is in full focus. Here’s the chart:
Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black, simple 10-day moving average on 11/29/17. We can combine that with the VantagePoint propriety neural index indicator moving from the zero (0) to the one (1) position. This indicator measures strength and weakness for a 48-hour period. The move to the one (1) position further makes the case for a potential bullish scenario. That’s why I am willing to entertain a setup to the upside or at the very least, not a move down.
If one were a straight stock trader, simply buying DPZ stock in the $183.00 area could prove to be prudent. You are anticipating a continuing move to the upside. It’s also a conservative way to enter DPZ without the limitation of time associated with other strategies. In this scenario, placing a sell-stop order in the $179.00 area to mitigate potential losses.
For more active traders with a shorter investment time horizon, you can consider a setup utilizing options. DPZ stock has accepted support in the $180.00 area. We can combine this with the indicators highlighted on the VantagePoint platform. This shows us an active approach to the upside could prove prudent.
Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation. The critical piece here is to identify a target price. We can determine a target price with three simple inputs. Those inputs are current price, time to expiration (expiration date) and at the money volatility for this time horizon. In this case, we will use a price of $181.55. The expiration we use will be 12/15/17 and at the money volatility of 27.8%. This yields a target price of $190.00. We can consider the December 185/190 call vertical which is trading $1.20 presently. This spread has a maximum risk of $1.20. THe maximum reward of the width of the spread of $5.00 less any premium paid. In this case, that’s $3.80. That gives us a reward to risk ratio of 3.17:1.
Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.