3 reopening actions that just hit rock bottom
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Reopening stocks have struggled in recent months. The delta variant of Covid-19 has kept buyers at bay and has caused many shareholders to question their bullish thesis. The sectors from casinos and cruise to airlines and rideshare saw their stock prices fall more than 30% from their 2021 highs. Many were largely oversold and expected to rebound.
Profits provided the spark.
Investors looked at this week’s reports of Royal Caribbean Cruises (NYSE:RCL), SeaWorld Entertainment (NYSE:SEA), Wynn Resorts (NASDAQ:WYNN), and Uber Technologies (NYSE:UBER) all worthy of purchases. Along with other so-called reopening stocks, those tickers littered the rankings on Thursday, some jumping over 7%.
If you are interested in bottom fishing in these areas, now is the time to cast a line. Here are my three favorite stocks to buy.
- Carnival Corp (NYSE:CCL)
- Delta Airlines (NYSE:DAL)
- MGM Resorts (NYSE:MGM)
Let’s take a closer look at each chart and establish an options trade to capitalize on.
Reopening Stocks: Carnival Corp (CCL)
The most important takeaway from Thursday’s CCL stock jump is that it created a higher pivot low. To attract buyers previously, prices had to push to lower levels. But not this time. This is the first sign we’ve had of growing demand since the stock peaked in June and signals a subtle change in character. Prices had retraced all of their post-November race gains and were ripe for a bottom anyway.
If you want more evidence of a trend reversal then pushing above the old pivot at $ 23.40 is the next hurdle. As for me, I think the signs of stability are enough to justify a trade here. The lower cost of shares works to the advantage of selling bare puts.
The exchange: Sell the September $ 20 put for 65 cents.
Your maximum payout is $ 65 per contract. If you are willing to buy stocks at a cost base of $ 19.35, you can allow the assignment at expiration if the put option is in the money.
Delta Airlines (DAL)
Airlines shares joined cruise lines in the bullish rejoicing on Thursday. For Delta, the jump couldn’t have come at a better time. With the rebound, DAL stock was able to form a potential double bottom in the $ 38 support area. Holding this is the first step in reversing your daily downtrend.
Unfortunately, Friday’s tracking error was rejected at the declining 20-day moving average, so the reversal attempt is not over.
Still, Thursday’s pop was compelling, and when you pair it with the broader change in sentiment for stocks to reopen, I think it’s worth getting into a bullish business idea.
To increase the chances of success, I go with another bare put trade. I would only enter this if you are comfortable betting that the DAL will stay above $ 34 for the next month.
The exchange: Sell the September naked put for $ 34 for 50 cents.
Your maximum payout is $ 50 per contract. If you are willing to buy stocks at a cost base of $ 33.50, you can allow the assignment at expiration if the put option is in the money.
Reopening of stocks: MGM Resorts (MGM)
We end with the strongest trend in the group. While many casinos have seen their stock prices plummet over the past two months, MGM has only suffered a correction in garden varieties.
Relative strength makes it an easy choice over other major players in the industry. This week’s earnings report got buyers in a rush, and the pricing table now sports a double-bottomed manual model.
The $ 36 support area has been steadfast for months now, and I think it’s worth betting that prices will stay above it going forward. As with previous trades, MGM’s lower stock price makes selling puts a desirable trade.
The exchange: Sell the September put for $ 35 for 70 cents.
Your maximum payout is $ 70 per contract. If you are willing to buy stocks at a cost base of $ 19.35, you can allow the assignment at expiration if the put option is in the money.
As of the date of publication, Tyler Craig had long been a DAL. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
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