Guest Post: NRG Bullish Option Trade
Guest post written by Jerremy Newsome: @newsomenuggets
After reviewing the energy sector I came across NRG, which broke through strong resistance in March after two failed attempts in October (see arrows). Recently the stock has retraced its entire bullish wave {from March to late June} back to that support at $29.00. 
On August 19th a one white solider candle pattern formed indicating strong bullish sentiment. There is also a longer-term bullish trend angle that connects from the July 2013 triple bottom. Finally, notice the stock is pulling away from the Bollinger Bands failing to pierce the bottom band (the blue arrow).
The Trade:
A simple option trade that I’ve carried out is to ‘buy to open the Jan 2015 $30.00 call at $1.80 per contract. My maximum risk is the entire investment of the calls ($180 x amount of contracts purchased). However, I would like to limit my risk by setting a stop below the support and trend lines I’ve outlined on the chart at $28.89. The target is $37.00 and some change. Let’s ‘guess’ and say NRG goes to $37.00 by mid November. Our call option would be worth at least $7.00. Pretty smashing return on investment if I do say so myself (and I do). Plan your trade and trade your plan folks. That’s what real life traders do! Enjoy your weekend ahead!