Happy days are here again for NASDAQ bulls, as the composite tech index hit a new all-time high yesterday and traded at its highest level since March of 2000. PowerShares QQQ (QQQ, $108.71) is part of that happiness, as it has offered steady growth in recent years – the ETF rose by nearly 18% in 2014, and is already up over 5% year to date.
So what is driving this tech optimism, and is there more room to the upside before this 1990s style bull run shows signs of abetting?
Strong performance from consumer tech giant Apple (AAPL, $128.60), coupled with good numbers from big tech names like Microsoft (MSFT, $43.33), have certainly aided sector performance. Even Google (GOOGL, $572.23), seemingly range bound throughout 2014, has seemingly shaken of its malaise and shares are up nearly 8% so far in 2015.
As analysts continue to forecast a big a year for the American consumer, I expect tech and the Nasdaq composite to continue to rally through year-end.
Looking to Jan16 LEAPS, I see the at-the-money Jan16 QQQ Straddle is about $15.25, implying an upside target of about $124.
My Trade
- Buy the Jan16 118-120 Bull Call Spread for $0.55
- Risk: $55 Per 1 Lot
- Reward: $145 Per 1 Lot
- Break-even (stock price at expiration): $118.55
While this spread undershoots the upside measure-move target ($124) by about $4, I like the trade because it offers a favorable return on my money (nearly 3:1) in what I consider to be a ‘high probability’ trade set-up.
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