It is another splendid Thursday afternoon and I am felling the hot vibes on a tech stock; hence, I will be postponing the update on previous options recommendation slated for today until tomorrow. Today, I am excited about the long-term possibilities in the options of Universal Display Corporation (NASDAQ:OLED).
Universal Display Corporation with its market capitalization of $1.25B is engaged in the research, development and commercialization of organic light emitting diode (OLED), technologies and materials. OLEDs are thin, lightweight and power-efficient solid-state devices that emit light, making them suitable for use in full-color displays and as lighting products.
OLEDs are better versions of liquid display crystals (LCDs) and are superior to ordinary LEDs. OLEDs are thinner, lighter and they offer richer colors to provide better displays in Smartphones, SmartWatches and possibly in TV sets when the production volumes makes them cost effective.
Why I am Excited About OLED Today
Shares of Universal Display Corporation have a 52-week low of $22.69 and a 52-week high of $39.74. As at 12:22PM EST, shares of Universal Display Corporation are trading up 0.98% to $27.73 per share. The stock is effectively trading at 22.21% premium to its 52-week low and at a 43.31% discount to its 52-Week high; hence, the stock has a higher room to run to its 52-week high and there lies the profit potential.
The chart above (with my annotations) shows how the shares of OLED have traded within the last one year. You will observe that the stock has been on a major trending decline from December through May. You will also observe that the stock has been soaring with a trending rally from May through September. You will also notice that the stock has a $26 support that held in June and recently this month. You will also observe a $31 resistance in July through November. Interestingly, the $26 support that held this month has been the backbone for the bullish trend up until the current $27.73 share price.
Long-term Prospects for OLED
One of the strong points in support of the long-term bullish trend for Universal Display Corporation is its ranking as the 140th fastest growing company in North America. However, the company’s recent third quarter (Q3 2014) earnings result provides an interesting picture that makes bullish plays smart on OLED.
In the third quarter, the company reported net income of $4.3 million, or $0.09 per diluted share to beat the consensus earnings estimate of $0.07. Revenue came in at $32.9M to mark a significant drop from the consensus estimate of $37.8M. In addition, the company expects revenue to be impacted by weak customer trends; hence, we are not likely see a major outperformance in the fourth quarter.
How to Trade OLED Options
The weak revenue showing in the third quarter and the weak outlook for the fourth quarter has been a major reason for cautious optimism on OLED stock. However, the long-term bullish trend remains strong and the rising RSI of 41.87 as shown in the chart suggests that the buying action is just starting out. I am bullish on OLED and I recommend buying OLED call options and the OLED Jan 2015 30.000 call (OLED150117C00030000) looks attractive at an asking price of $1.15 for a contract.
— Daily Option Alerts