Oversold Stock of the Day: ADT Inc. (ADT)
Home security protection company ADT Inc. (ADT), has seen its share price slide in recent sessions. In addition to erasing the stock’s gains over the past year, conditions are now reading as oversold. That spells an opportunity for investors looking for a bounce.
Shares peaked at nearly $17 at the start of August on a big spike higher, and have since dropped heavily. They’ve shed over half to trade in the $7.50 range. The company’s relative strength index, overly bullish following the spike, has now gotten oversold. The most recent reading has been in the 23 range.
The company’s shares have shown some sign of life in trading as the price approaches the 200-day moving average. If shares can hold above that, a bounce could occur within the next few days to few weeks.
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Action to take: The February 2021 $10 calls, trading for around $0.30, are an inexpensive play on a bounce higher in shares in the coming sessions. And if shares continue to trend lower in spite of being heavily oversold, traders won’t have a big loss to contend with.
The options are inexpensive enough to offer high-double to low-triple digit returns for traders within the next few weeks. Given the low price, traders can buy multiple contracts and look to exit the trade in tranches, should a long-term rally in the stock start to unfold.