Today’s setup is in Generac (GNRC) . After an earnings beat and a blistering 32% pop on July 30, the stock drifted lower for a month — a normal profit-taking after a vertical move. Now it’s stabilizing and starting to bounce, setting up a clean bullish opportunity. I typically want two-to-three confirmations before pulling the trigger. For this trade, I’m watching: RSI: curling higher after a pullback to reset momentum. MACD (5,13,5): nearing a bullish crossover / rising histogram. DMI: DI+ turning up while DI– eases, with ADX steadying. If these line up, GNRC’s rebound case gets a lot stronger. RSI (Relative Strength Index) RSI is a versatile momentum indicator that flags overbought/oversold extremes and helps spot reversals. On GNRC, RSI just pivoted higher after nearing oversold territory—an early hint that momentum may be turning back to the upside. Directional movement index (DMI) The DMI comprises three lines—DI+ (green), DI– (red), and ADX (blue), which measures trend strength. When DI– sits above DI+, sellers are in control; when DI+ starts climbing and DI– rolls over, it often flags an early momentum shift. On GNRC, DI+ is curling higher while DI– is fading, suggesting selling pressure is easing and bullish momentum is beginning to build. MACD (moving average convergence divergence) MACD is a solid reversal indicator. The standard (12,26,9) can lag, so I often switch to (5,13,5) for quicker signals. On GNRC, the MACD line (blue) is on the verge of crossing above the signal line (yellow)—the last piece of the puzzle for this trade setup. If you like trades like these, I’m opening up my options trade scanner for free today for my CNBC readers —grab a few more trades like this while it’s live. I also break down these setups in detail in my book Mean Reversion Trading . The trade setup: GNRC 180-185 bull call spread To take a bullish shot on GNRC , I’m using a bull call spread — defined risk, defined payoff. The base setup: buy the $180 call and sell the $185 call as a single unit. If GNRC is trading at or above $185 by expiration, the spread pays its full $5 value — turning roughly a $2.50 debit into a 100% return. With 10 contracts , that’s $2,500 at risk for a potential $2,500 gain. If price drifts a few bucks in the meantime, I’ll adjust the strikes to keep them bracketing spot. Here is my exact trade setup: Buy $180 call, Oct. 3 expiry Sell $185 call, Oct. 3 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradewithmaya.com https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has a GNRC 180-185 bull call spread expiring on Oct. 3. 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.
Thursday, February 12
This generator stock has soared since earnings. An options trade to ride out further gains
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