SLG: ‘Buy Zone’ Opportunity Spotted
August 20th, 2024
SLG: ‘Buy Zone’ Opportunity Spotted
REITs are on the rise! For today’s Trade of the Day we will be looking at a Keltner Channel chart for SL Green Realty Corp. stock symbol: SLG.
SL Green Realty Corp., is a New York City’s largest office landlord, is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing, and maximizing value of Manhattan commercial properties.
Now, let’s begin to break down the Keltner Channel chart for SLG.
The Keltner Channel “Buy Zone”
The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement.
Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, it’s price will typically decline soon after as the inevitable profit taking occurs.
The SLG daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as SLG has traded above the Upper Keltner Channel on multiple occasions recently.
But, in every scenario when SLG became overbought, the stock soon experienced a pullback.
Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.
The Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower-risk buying opportunity as the stock is likely to rally.
Profit if SLG is Up, Down, or Flat
Now, since SLG is currently trading in the Keltner Channel ‘Buy Zone’, this offers a prime trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a SLG call option spread.
The analysis reveals that if SLG stock is flat or up at all at expiration the spread will realize a 78.6% return (circled).
And if SLG stock decreases 7.5% at option expiration, the option spread would make a 33.2% return (circled).
Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.
A higher percentage of winning trades can give you the discipline needed to become a successful trader.
The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.
The prices and returns represented below were calculated based on the current stock and option pricing for SLG on 8/19/2024 before commissions.
*Trading incurs risk and some people lose money trading.