Follow Options Trading Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
So far, 2021 is already shaping up to be great for traders. Two days after the Nasdaq and S&P 500 reached all-time highs, the bears ravaged the market for its biggest loss in three months on Wednesday.
Short-sellers are getting crushed, and even some the Big Tech leaders - like Apple Inc. (NASDAQ: AAPL) and Tesla Inc. (NASDAQ: TSLA) - are in play with huge moves higher and lower.
In other words, volatility is back, and that makes this a great market for options traders.
Not only that, but earnings season is here, and that is usually a major catalyst for stocks. One of the themes Money Morning Quantitative Specialist Chris Johnson has identified for this season is the rebuilding of America.
And nothing supports that effort like the raw materials industry...
New Extra Income Hack: This could be your shot to collect $1,000 to $5,000 a week - regardless of how volatile the markets are. WATCH NOW.
The basic materials sector is at the base of the economy, providing the steel, chemicals, copper, and other raw materials everyone else needs to make and build things, including infrastructure. Top on Chris' list is chemicals maker Chemours Co. (NYSE: CC).
When I talked to Chris this morning, the first bullish indicator he noticed is how quickly CC stock is accelerating above its 50-day moving average.
The best part is this is all happening just ahead of Chemours' next earnings report scheduled for Feb. 11.
The $30 level is critical because it has turned back the bulls on several occasions. Strong earnings will make $30 per share for CC look cheap. Buyers are likely to flood in and run the price higher.
In the news over the past week has been short-sellers in formerly mundane stocks, creating something called a "short squeeze."
This is a condition where stocks that have been heavily shorted - in other words, a lot of big bets have been made that the stock prices will drop - start to rally.
This creates a feedback loop whereby the short-sellers, seeing mounting losses, are forced to buy back the shares they borrowed to sell. That pushes the price higher, forcing even more short sellers to buy.
You get the picture. Think about what has been happening lately to GameStop Corp. (NYSE: GME). The stock has gone from $20 per share to as high as $483 in just a few days.
The problem with shorting stocks is that there is unlimited downside. That's why short-sellers can get into a panic if the market moves against them.
While Chemours may not be as heavily shorted as GameStop, it does have a fairly high level of shares sold short. That means if it can break though the $30 level, all of that short covering (buying) will kick in and light a touch under the stock.
Toss in positive fundamentals, and Chris thinks this can be a big winner.
Of course, we can boost that return even more with options...