Varian is Primed to Move

• Posted by Greg Harmon
• on February 17th, 2015

Sometimes you can just sense something is about to happen, even without taking any special measurements. Maybe the wind shifts or the lighting changes to give you a clue. You wonder after the fact how you knew it would happen. Those moments can happen to traders in the stock market too. If you act on all of them you are likely to loose all of your money quickly as many do not pan out. And if you wait for them to start you often miss the opportunity completely. That is life.

But there are some opportunities that set up to let you prepare for them perfectly. The current price action in Varian Medical Systems ($VAR) is one of them.

This chart shows just the price action since October. Moving from a bottom at 78 to the consolidation range around 88 through December and January, it broke higher. This would target a move to 98. The recent pause, at about halfway to that target is creating another pattern, a symmetrical triangle. And guess where it would target a move to on a break higher? Yup, 98.

Of course this does not have top break to the upside. If it were to break down then it would target a move back to 88. Or it can just keep moving sideways. With the tight range days for the last 9 days this is the least likely.

Feeling that something is going to move and being able to profit from it are two different things though. You can’t just buy the stock and short the stock to take care of both possibilities. Or can you? Actually you could buy a March 90/95 Strangle for less than $2. If the stock does continue to 98 the call side would be worth at least $3. If it breaks down the put side would be worth at least $2. Almost a guaranteed winner.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through January 2015 Expiry and sign up here

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus