It’s hard to find a stock that is as compressed and ready to move as this one.
It has a 2-month compression pattern that has traded in a range that is only 3% of its price!
Plus it has an earnings announcement coming up in less than 30 days, which could really boost this trade’s profit potential!
This is a perfect trade for a simple long call strategy.
Look at the chart of Allstate (ALL) below.
The compression over the last two months makes it a perfect candidate for a break out entry if it trades over $96.
If it breaks out a good stop would be under $94.
However, rather than risk $2 per share buying the stock, I think it makes more sense to buy the July 100 calls which will cost about $2.
If it breaks out, it could run to $100 before the earnings announcement on May 1, which would most likely hand you a 100% gain or more.
The earnings could really boost this trade’s profit.
Holding into an earnings announcement is a gamble, but if you can take some profits on part of this trade before the announcement, then you’ll have a low-risk way to take a chance on a big gap up in your favor.
Rick Nartarian, Chief Investment Officer
The American Investor Daily