PEG Looks Bullish

I ran a scan on Finviz.com and found this bullish looking chart on the PEG stock Daily chart. Here's what I saw:

• Flag Breakout
• Positive Stochastics Diversion 
• See angled yellow support line segments under Price and Stochastics
• Bounced off 61.8% Fibonacci
• See light blue Fib line
• Close over and retest 50sma
• Bollinger Bands/Keltner Channel Breakout
• Possible AB/CD
• See thick angled duplicated white line segments
• Not closing below 8ema past 8 days
• Above all Moving Averages
• Morning Star candle pattern

A negative in this setup is the overbought Stochastics. However, look at the Stochastics between 9/28/20 - 10/27/20. Notice they are pegged (no pun intended) in the overbought area while price continued upward from 50.32 - 61.89. Why can't that happen again?

It would be safer to wait until we've closed over the previous high swing point at 62.15, but given all the bullish indications and the overall bullish stock market, I don't think its very imprudent to enter early.

So, at 3:14pm ET, after giving today's candle a chance to do what its going to do, I got a June 60 Call for $2.70. The cost nor the Theta decay warranted a spread, in my opinion, so I just got a simple Call.

Set the Stop just under the low of 2 candles before the current candle. The low of the 2nd candle back is 57.32. I set the Stop to 57.30.

There are many ways to trail a Stop. I like trailing the low of 2 candles back. Candles violate the low of the adjacent previous candle, and then continue with the trend, much more frequently than the low of 2 candles back. We're not actually going to trail this Stop for some time, if ever, but trailing Stops is where I got the idea to place the Stop for this trade.

A more typical and "proper" Stop would be under the swing low of 54.96, like maybe 54.90. But since the Stochastics are overbought, I wanted to use a tighter Stop.

Considering a Target, notice the AB/CD terminates over the 27.2% Fib extension but before the 61.8% Fib extension. Because of this, and the high Stochastics, I want to set a conservative Target. So I set it to 65.36, just before the actual 27.2% Fib of 65.38. I like to shade actual targets a little to account for slippage, Bid/Ask Spreads, and outright near misses. Two cents isn't really enough but the AB/CD suggests price will exceed the 27.2% Fib by a generous margin.

Entry equivalent 58.85

Stop 57.30
Target 65.36

Entered with Jun 60 Call 2.70

Delta .463, Gamma .048

If we hit the Target at 65.36 then price will cover 65.36-58.85=6.51

Gamma indicates we should add .048*6.57=0.31248 to our initial Delta of .463, or 0.77548, or .775 with rounding.

If we average these to get a rough effective Delta, (.463+.775)/2= .619

So, our reward is approximately 6.57 profit * .619 Delta * 100 shares = $406.68

Our risk is the cost of the option, 2.70 * 100 = $270

So, Reward:Risk = 406.68/270 = 1.5:1, not great but acceptable.