RTN| Raytheon 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. RTN is in focus today….

This journal entry looks at the recent market movements of Raytheon NYSE: RTN

VantagePoint Trading Journal RTN

The market seems to be trading at the whim of every subsequent earnings report release. That means we should expect to see a continued yo-yo effect for the next week or so until we get a more solid picture of where the broad market stands. 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 up or down from here and I will act on a strong signal in either direction.  Today let’s consider Raytheon (RTN) for a potential set up. They reported earnings on 10/26/17 before the market open and the market did not like the news.  Here’s the chart:

image of RTN trading diary with VantagePoint
RTN did not see a positive response following their earnings report release. VantagePoint indicated a bearish crossover on 10-26.

Using the predictive indicators of VantagePoint, we will note two important things. We have a bearish crossover indicated by the blue predictive moving average line crossing the black simple 10-day moving average on 10/26/17. We also see the VantagePoint proprietary neural index moving from a one (1) to a (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 bearish scenario.

This earnings report really has changed the complexion of RTN. For the short-term, I am willing to entertain a bearish setup.

If one were a straight stock trader, simply selling RTN in the $182.50 – $183.00 area could be prudent in anticipation of a move to the downside. This would be a conservative way to enter RTN because you don’t have the limitation of time associated with other trading strategies. A stop order in the $188.00 area would also be something to consider to mitigate potential losses.

If options is more your style, there’s some potential in RTN as well. Remember, the additional volatility associated with earnings season means we should require more return for our risk.

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 yields a project move of approximately $6.50 or 3.5% which targets the $176.00 price level.  Let us consider then as a possible bearish set up using the RTN November 175/180 put vertical paying $0.85. This will have a maximum risk of what one would pay for the spread ($0.85). The maximum reward will be the width of the spread less any premium paid or $4.15. This yields a reward to risk ratio of 4.88:1. 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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