Insurance ETF Climbs Amid Market Slump

Yesterday, we looked at a Daily Price Chart for July 19th, 2024 Insurance ETF Climbs Amid Market Slump Dear Reader, Yesterday, we looked at a Daily Price Chart for [Amgen Inc.](, noting that AMGN’s 24/52 Day MACD is trading above the 18-Day EMA signaling a ‘Buy’. For today’s Trade of the Day e-letter we will be looking at a daily price chart for SPDR S&P Insurance ETF, symbol: KIE. Before breaking down KIE’s daily chart let’s first review the investment objective of the ETF. The SPDR SP Insurance ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the SP Insurance Select Industry Index. Now, let’s begin to break down the Daily Price chart for the KIE ETF. Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for KIE. 50-Day EMA and 100-Day EMA ‘Buy’ Signal The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving. - 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal - 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the ETF’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal. Want more trade highlights like this one, except with actionable option trade recommendations? [Click here]( to check out my Weekly Optioneering Newsletter. Right now, the first month costs just $1, a fraction of the normal $39 monthly subscription fee. Buy the KIE ETF As the chart shows, on July 11th, the KIE 50-Day EMA, crossed above the 100-Day EMA. This crossover indicated the buying pressure for the KIE ETF exceeded the selling pressure. For this kind of crossover to occur, an ETF has to be in a strong bullish trend. Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play. As long as the 50-Day EMA remains above the 100-Day EMA, the ETF is more likely to keep trading at new highs and should be purchased. Our initial price target for the KIE ETF is 53.80 per share. 87.5% Profit Potential for KIE Option Now, since KIE’s 50-Day EMA is trading above the 100-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a KIE call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat KIE price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following KIE option example, we used the 1% Rule to select the KIE option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation. Trade with Higher Accuracy When you use the 1% Rule to select a KIE in-the-money option strike price, KIE only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying ETF closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if KIE is flat at 52.53 at option expiration, it will only result in a 3.8% loss for the KIE option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to ETFs. The prices and returns represented below were calculated based on the current ETF and option pricing for KIE on 7/18/2024 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying ETF continues to move up in price. For this specific call option, the calculator analysis below reveals if KIE increases 5.0% at option expiration to 55.16 (circled), the call option would make 41.9% before commission. If KIE increases 10.0% at option expiration to 57.78 (circled), the call option would make 87.5% before commission and outperform the ETF return nearly 9 to 1*. The leverage provided by call options allows you to maximize potential returns on bullish ETFs. The Hughes Optioneering Team is here to help you identify profit opportunities just like this one. Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Check out Chuck’s PRO Trading Service! I don’t want you to miss a single opportunity to potentially reach your goals. That’s why I want to share [this video]( I made about my PRO Trading Service. I want you to follow in my footsteps for the opportunity to succeed beyond your wildest dreams, so please call my office at (737) 292-4425 and get started today! Wishing You the Best in Investing Success, Chuck Hughes Editor, Trade of the Day Have any questions? Email us at [dailytrade@chuckstod.com]( *Trading incurs risk and some people lose money trading.  --------------------------------------------------------------- See Related Articles [AMGN: Time to Buy Top Biotech?]( [Buying Pressure Drives MAA REIT]( [Data Center REIT Jumps to New Highs]( --------------------------------------------------------------- [TradeWins Logo](  © 2024 Tradewins Publishing. 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