United Technologies Corp. (UTX), which has been trading in the range of $90.62 – $98.16 over the past 30 days, is seeing very strong technical and fundamental characteristics that make it a buying opportunity.
The stock has been showing support around $93.60 and resistance in the $97.60 range. At present, the stock is trading above the 50-day moving average and above the 200-day moving average. RSI indicator shows oversold reading at 36.91
A LOOK AT FUNDAMENTALS
United Technologies’ bullish technical indicators are supported by strong fundamentals, as well.
UTX reported net income of $1.39 per share, compared with the average $1.29-a-share estimate by 22 analysts in a Bloomberg survey. Profit from continuing operations gained 6.8 percent to $1.27 billion, and sales climbed 16 percent. Earnings in the aerospace systems division more than doubled to $501 million, bolstered by the purchase of Goodrich, the world’s largest manufacturer of aircraft landing gear. One-time items, including a gain from the extension of a tax credit for research and development expenses added 11 cents to earnings per share in the quarter.
In addition, UTX reaffirmed a forecast for full-year profit of $5.85 to $6.15 a share on $64-65 billion in sales.
OPTIONS STRATEGY RECOMMENDATION: DEBIT CALL SPREAD
Technical and fundamental indicators both show a bullish environment for UTX. Investors should consider the following debit call spread: Buy July 2013 95.00 Calls at $2.80 and sell the July 2013 97.50 calls at $1.60. The net debit to start is $1.20, and we recommend holding until spread price reaches $2.50. This strategy will allow you to collect time premium for out of the money short call and decrease the overall cost of the initial investment.
