Trade Follow-Up: Buy Puts on NTCT

Earlier today, I sent you an alert adding a new position in NetScout Systems Inc. (Nasdaq: NTCT).

Now, let’s take a closer look at the details of this trade.

NTCT is a stock with a strong seasonal trend and an interesting technical pattern.

And it just triggered a VIX Flip sell signal…

Tracking the VIX Flip for NTCT

(Click here to view larger image.)

To recap, the VIX Flip indicator is designed to catch changes in traders’ emotions. (You can learn all about this new indicator I am now using in an announcement here.)

NTCT is trading just below resistance near $25. The stock failed at this level in September and appears to be encountering resistance at this price again, setting up a potentially big down move. The target price, based on the pattern, is about $19.

We have time in this trade to reach that level, potentially taking a triple-digit gain.

What also makes this stock attractive to me is its strong seasonal trend…

NTCT’s Seasonal Trend Is Down!

In the graph below, the black line represents the stock’s price. Meanwhile, the green line shows its seasonal trend, which I forecast a year in advance. The vertical blue line marks today.

As you can see, NTCT shows a tendency to decline for much of the first three months of the year.

NTCT Is Set to Move Lower

(Click here to view larger image.)

In back testing, I found that NTCT has delivered a gain 80% of the time with this trade setup.

On average, the stock declined about 1.3% over the course of six weeks, but the trend could continue past that — and we are positioned for that.

With puts, we can leverage that move into an even larger profit.

Here are the trade details…

Your Trade Details

Specifically, I recommend the March $22.50 put option.

Trade Recommendation

Buy Action to Take

Stock:

NetScout Systems Inc. (Nasdaq: NTCT)

Option Type:

Put Option

Expiration:

March 15, 2019

Strike Price:

$22.50

Option Symbol:

NTCT190315P00022500

Action:

Buy to Open

Order Type:

Limit Order

Duration:

GTC (Good ‘Til Canceled)

Limit Price:

$1.65 (This is in the middle of my buy range. Please refer to the below buyzone chart for other options.)

Trade Deadline:

If we are not officially filled by the close on Friday, cancel all open orders, and I will update you in the weekly market update.

Note: Do not place a market order. Set the limit order anywhere within the range shown in my buyzone chart below.

Once this order is filled, place the following order:

Sell Action to Take

Stock:

NetScout Systems Inc. (Nasdaq: NTCT)

Option Type:

Put Option

Expiration:

March 15, 2019

Strike Price:

$22.50

Option Symbol:

NTCT190315P00022500

Action:

Sell to Close Half

Order Type:

Limit Order

Duration:

GTC (Good ‘Til Canceled)

Limit Price:

Whatever nets you a 25% gain based on your entry price. (Example: Sell half your contracts at $2.06 if entry is $1.65.)

Trade Deadline:

Keep this order open until it is filled or canceled.

Note: This second order will allow us to collect a 25% gain on half of our contracts if a quick move happens before I can get a trade alert to you.

Next is our buyzone chart. Buying up to the middle limit order will give you great value. But there is still room for a significant profit if you use my “Expensive” and “Very Expensive” prices.

NetScout Systems Inc. (Nasdaq: NTCT)
March 15, 2019 $22.50 Puts

BUYZONE

Cheap Less
Cheap
Middle
(Limit Price)
Expensive Very
Expensive

$1.50
-9.1%

$1.55
-6.1%

$1.65

$1.75
6.1%

$1.80
9.1%

Use the limit price based on your preference.

That’s all for now, but if you have any questions about anything in today’s alert, please send me an email at precisionprofits@banyanhill.com.

Regards,


Michael Carr, CMT
Editor, Precision Profits