Dell Stock Pullback Presents Attractive Entry Point

DELL has multiple layers of technical support in place

Jul 25, 2023 at 1:54 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this DELL commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Dell Technologies Inc (NYSE:DELL) began trending higher following a late-March breakout above a year-long trendline connecting lower highs on the weekly chart. Shortly after the tech name’s late-May earnings, the shares moved above the $51-$52 area, where sellers emerged in April-May. Now, with the stock experiencing a mild pullback following its move into short-term overbought condition at the beginning of July, it looks like a good time to bet on DELL’s next leg higher.
 
On 7/20, Dell signed an agreement to acquire Moogsoft, an artificial intelligence (AI)-driven provider of intelligent monitoring solutions. The investor call on 7/27 could also serve as a near-term catalyst.
 
DELL has the potential to run up to the $60-$62 area, which is home to its early 2022 highs. Plus, short interest is rolling over from its 2023 peak, after a 50% build in short interest from February-April that kept pressure on the stock. If shorts continue covering, that former headwind could turn into a tailwind.

DELL July21

October’s implied volatility (IV) of 29% is in line with its 63-day historical volatility (HV), implying options are reasonably priced at the moment.
 
Our recommended call option has a leverage ratio of 8.24, and will double on a 12.6% pop in the underlying shares.

 

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