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Trade Details: Bought to open 5 Oct 22nd CME Group Inc (NASDAQ:CME) 103 calls for $1.55, $782.65 total cost (30.0% of account), 4 days to go. The trade executed at 11:35:42 when the stock was approximately $104.30.
Potential: Unlimited, but targeting $107 for the underlying stock to exit the trade before expiration. Should CME trade below $104, then reevaluation of the position is prudent.
Thesis: Trade in CME shares was strong on Friday as moving averages (9-period and 21-period on the 240-minute chart below) crossed in a bullish manner. Yesterday, those gains were erased on low volume. Today, the 240-minute candlestick chart appears to be forming a morning star bullish reversal pattern.
This pre-earnings price action has been observed before (see chart below). If history repeats, then a snap higher could occur in the next few days. Supporting the move: the stock's propensity to rally into earnings and positive signals from the frequently mentioned momentum indicators (MACD, Stochastics, Momentum and RSI). Let's see what happens when volume returns...
I don't follow the stock's fundamentals closely, but I think the company's pricing power and excellent profitability ratings help drive shares higher into earnings with some consistency. I also perceive CME to be relatively insulated from big currency moves and the resulting volatility that's been impacting markets lately.