DailyPlay – Opening Trade (DEO) – March 8, 2024

DEO Bullish Opening Trade Signal

Investment Rationale

Alcohol sales have been under pressure for a few years and Diageo’s stock has underperformed with it. However, the world’s largest alcohol company has started to see a turnaround and has the potential to start a longer-term bullish uptrend. 

Technical Analysis

Having shed about a third of its value from its peak in 2021, DEO has started to signs of bottoming around the $137 area. It has closed above its major $147 resistance level and continues to form higher lows and targets $160 where it will fill its gap. 

DEO – Daily

Fundamental Analysis

While expecting about 11% EPS growth, DEO only trades at 16x forward earnings, making it significantly undervalued relative to the market and its peers. It also generates a large amount of free cash flow and has a strong history of returning cash back to investors in the form of dividends. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 4 Contracts April 19th $145/$155 Call Vertical Spreads @ $4.72 Debit.

Total Risk: This trade has a max risk of $1,888 (4 Contracts x $472) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $472 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is neutral and in a larger bullish trend.

1M/6M Trends: Neutral/Neutral

Relative Strength: 3/10

OptionsPlay Score: 96

Stop Loss: @ $2.36 Credit. (50% loss of the premium)

View DEO Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Thursday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View DEO Trade