Options Trading: Salesforce Sees Bullish Flow on a Price Breakout
Software-as-a-service (SAAS) companies have been making a solid comeback from a deep oversold condition. One of the biggest losers during a prolonged downtrend was Salesforce ($CRM), which fell about 40% from highs in January to the depths in late June. Since that bottom was put in, there has been a solid series of higher highs and higher lows and taking out some tough resistance levels. The recent move above the 200-day moving average is within the steep uptrend channel drawn.
What does that steepness mean? Simply put, the steeper the channel the more volatility in the price, and Salesforce is no exception. Volume trends have improved, relative strength at levels not seen since May and money flow is bullish and improving.
The company will report earnings this week, there has been some good option trades building over the past several weeks as the stock has been rising. We have seen call buying pushed higher in the September 200 and 210 strikes, also some good added in the October series lately in the 200 to 220 strikes. These at the money plays are probably the best way to play it.
The expected move on earnings is about $17, which is about 8.5% of the price, a bit bigger than normal. The stock has moved sharply post earnings over the last eight quarterly announcements, often seeing some good followthrough if the chart/technicals are bullish. They are this time. The October 210 call at $14.70 seems a solid play for a move up to 250, a bit riskier might be the 220 strike at $11.
