EOT Trade Alert – October 31, 2011

| October 31, 2011

October 31, 2011

Trade Alert:

  Buy PEGA December 2011 $40 Calls at $2.25 or better

Company Background:

Pegasystems (PEGA) develops and licenses software to manage complex business processes.  Companies combine PEGA’s business process management (BPM) software and the business rules engine (BRE) to automate decision making.

Short-Term Catalyst:

You might recall Pegasystems from previous trades over the last few years.

In 2009, our call options reached peak gains of 365%.  And last year our call options skyrocketed to an eye-popping gain of 738%!

Well, it’s time to go back to the well one more time.

PEGA has cemented itself as a leading innovator in customer relationship management, business process management, case management, and business rules.

Their products have industry analysts heaping praise on the company by the truckload.

And more importantly, their products are driving robust revenue growth.  In fact, during the first six months of 2011, revenue surged by 31% over the year ago period.

What’s more, PEGA is one the fastest growing software companies of the last five years.  They’re one of only a handful of software companies who have grown revenue at more than 25% per year.

With numbers like that, we know PEGA isn’t a one hit wonder.  They’ve shown they can consistently grow their business over the long run.

I’m expecting them to report more solid revenue growth when they announce their quarterly earnings on November 9th.

But here’s the kicker…

PEGA’s chart looks great!

You see, earlier this year, PEGA’s stock price was nearly cut in half.  The stock fell from a high of over $47 to a low of nearly $28.  And in the process, it fell below the 200-day moving average, a key technical support zone.

But since then, PEGA’s up more than 33% off the recent low.  It’s moving higher on big volume.  And most importantly, it’s above the 200-day moving average again.

Simply put, this is a bullish reversal.  And with quarterly earnings due out in a few weeks, I think we’ll see PEGA’s uptrend continue.  In fact, I think we’ll see PEGA back at the 52-week high before the end of the year.

Let’s grab call options to profit from this amazing growth stock.

Trade Details:

Underlying Stock Symbol: PEGA
Current Bid-Ask Price: $1.60 – $2.00
Option “Buy Up To” Price: $2.25
Break-Even On Stock At Expiration: $42.25
Maximum Risk Per Contract: $225


Exit Strategy:

PEGA is trading at $37.99 per share.  Resistance levels will be at $41.50 and again at $47.50.  Remember, we want this stock to move higher.  Support levels will be at $33 and $30.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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