EOT Trade Alert – May 3, 2010
May 3, 2010
Trade Alert:
Buy UTX Aug 21 2010 $80 Calls at $2.05 or better
Company Background:
United Technologies (UTX) provides technology products and services to the building systems and aerospace industries worldwide.
Short-Term Catalyst:
UTX reported Q1 earnings a few weeks ago. They came in “in-line” with analyst expectations. Their earnings growth is being driven by restructuring and aggressive cost cutting throughout the recession.
Now UTX is positioned to reap the benefits as the world economy continues to improve.
The lean cost structure, along with improving orders in emerging markets, should drive earnings growth this year. As earnings grow, UTX’s stock price should continue moving higher.
UTX also looks like a bargain at its current price.
Their PE ratio is 17.5. Well below the industry average 23.4. And their PEG ratio of 1.5 is also well below the industry average of 2.
UTX’s stock price should continue climbing to get it back in line with industry valuations.
On a technical basis, UTX is set up to make another push higher.
UTX is in a strong uptrend.
A few weeks ago, UTX spiked higher on heavy volume when they announced earnings. But it’s since fallen back to support of the 20-day moving average.
There are also multiple support lines converging just above $72. This level should provide support if the market pulls back in the short term.
Let’s grab these options now before UTX’s momentum carries it even higher.
Trade Details:
| Underlying Stock Symbol: | UTX |
| Current Bid-Ask Price: | $1.86 – $1.94 |
| Option “Buy Up To” Price: | $2.05 |
| Break-Even On Stock At Expiration: | $82.05 |
| Maximum Risk Per Contract: | $205 |
Exit Strategy:
UTX is trading at $75.56 per share. Resistance levels will be at $80 and again at $85. Remember, we want this stock to move higher. Support levels will be at $72 and $70. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.
Chart:
Category: EOT Trade Alert
