The back story: The bad news for Equifax Inc. (EFX) in September – with the massive data breach affecting roughly 150 million Americans – has been good news for FireEye Inc. (FEYE), a cybersecurity stock that provides web and e-mail security. It also has moved all year on news of ransomware and malware.
The stock is up more than 16 percent in the last month – and 40 percent year-to-date – with more than half of that gain coming since the Equifax news broke.
The set-up: FireEye has a breakout chart in this bull market, with strong sentiment behind it and continuing headlines every time there is more Equifax news. That chart responded to EFX news yesterday.
The play: Assuming markets stay bullish, I’ll be playing the breakout with November at-the-money calls, looking for 10 percent or more to the upside. I tried this same play about a week ago, but I was early and the chart wasn’t quite there; even when the story is good and the set-up looks promising, you have to be patient and wait for the right entry point.
For me, that point now is if FEYE continues to find buyers and breaks through $17.30. I’ll stop out at $17, but I think it is more likely to get to $18, a mental resistance area, possibly in the next day or two if buyers show up.
Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options. At the time this article was published on RagingBull.com, he had no shares, options or open orders in FEYE, but was watching 11/17 at-the-money calls for a possible trade as described in this commentary. He last traded FEYE options on Sept. 27 for a loss, as described here.