Alphabet is leading a Big Tech rebound. This options trade lets traders capitalize on the move
After a historic correction that briefly brought the market to its knees, the S & P 500 has come roaring back — recovering around 16% in less than a month off its April lows. Leading the charge are many of the "Magnificent Seven" stocks, including Alphabet (GOOG) , which is showing strong momentum in this rally. To identify a potential bullish trade setup on GOOG, I'm analyzing a couple of key technical indicators for confirmation: MACD (12,26,9): The MACD is a versatile indicator that can help spot both trend reversals and the strength of the current trend. Right now, the MACD line is above the signal line, confirming that an uptrend is currently in play on GOOG. Exponential moving average crossover: EMAs are a favorite among trend followers for spotting longer-term trend shifts. In the chart below, I'm using the 8, 21, and 34 EMAs to track momentum. You'll notice the 8 EMA (blue) has recently crossed above the 21 EMA (yellow) and is now approaching the 34 EMA (pink). Looking back over the past nine months, each time we've seen this kind of crossover sequence, it's signaled a shift in trend. That same pattern is unfolding now — reinforcing the idea that a new bullish trend is emerging and the sharp correction we just went through may be in the rearview mirror. The trade setup: GOOG $165-$170 bull call spread To capitalize on a potential move higher in GOOG, I'm deploying a bull call spread options strategy. With the stock trading near $166, the setup involves buying the $165 call and simultaneously selling the $170 call — creating a defined-risk trade. If GOOG finishes at or above $170 by the June 6 expiration, the position will return 100% on the capital risked. This strategy allows me to participate in the upside potential while keeping both risk and reward tightly controlled. Here is my exact trade setup: Buy $165 call, June 6 expiry Sell $170 call, June 6 expiry Cost: $250 Potential Profit: $250 I dive into setups like these in much more detail in my book Mean Reversion Trading , and you can explore hundreds of real trade examples on my site: tradingextremes.com . -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: Nishant Pant has a GOOG 165-170 call spread expiring on June 6. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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