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Unusual Pattern of the Day: ViaSat Inc (VSAT)

Unusual Pattern of the Day: ViaSat Inc (VSAT)

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  • Satellite internet company ViaSat (VSAT) has been in a strong uptrend in recent months, with shares nearly doubling since late December. Shares look set to move higher, although a slight pullback may occur first.

    Let’s start with the short-term pullback. It’s likely, as shares have surged so quickly that the stock’s relative strength index, or RSI, is 87. Remember, an RSI of 70 is where overbought territory starts. A quick and sharp pullback could be in the cards.

    Following that, shares just saw a golden cross. That occurs when a stock’s 50-day moving average crosses over the 200-day moving average. That’s a solid multi-month indicator that shares are likely to trend higher.

    Action to take: There are two swing trading opportunities here. To play a pullback in shares in the coming weeks, the March 2021 $50 put, trading for about $0.85, is a trade that could deliver big results depending on the speed and severity of a pullback. Traders should look for a massive down day or two and take profits, before targeting a long-side rebound trade.

    Once shares are no longer in overbought territory, traders should consider the September $65 calls for a longer-term trend higher. That option trades for about $8.30, but will be far cheaper following a quick drop in shares, possibly in the $5 range depending on the speed and size of the prior drop.

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