In our last article, we discussed the principles of delta neutral investing, why it might make sense in the current market conditions, and a stock to potentially short in the coming weeks.
But in order to keep ourselves as “neutral” as can be, we need to complement that MNST trade with another one trending upwards.
So, as promised, let’s examine a chance to take an often-overlooked stock long. One that, in the event of a market surge, has some room to run given the arguably oversold status of equities in general.
Rollins Inc. (NYSE: ROL), a pest control company, is probably not a name most consumers recognize. Their largest subsidiary, Orkin Inc., may “ring a bell” however. As the parent company of a number of pest control services, Rollins has had an up-and-down year for sure.
In the weekly candlestick chart above (which I like to use in times of high volatility, compared to daily candlestick charts), you can see that despite all of the negativity surrounding ROL, it has survived to fight another day.
In fact, it could be ready to burst upwards, setting another higher high in the process.
After all, it just set both a higher low and a higher high, and better yet, stochastics (not pictured) read at a low 20.12, suggesting that the dive from mid-April to the start of May was overly severe.
Traders woefully oversold the stock, just like they did in December of 2018, and a healthy comeback could be in the works.
In addition, the 50-day moving average (thin blue line on the chart) is trending
The cherry on top of it all is that in the last month, ROL has set up an obvious trigger price to go long, 0.50% above the highest high of the last 4 weeks at $38.10.
Should ROL eclipse that price point, I would have no issue jumping into this trade by simply buying the stock or a suitable option with sufficient open interest.
Combined with our MNST trade setup on the short side, we’ve now got a “dynamic duo” that could deliver profits in all conditions.
A double-edged sword, slicing both ways as the market makes up its mind.
And even if it doesn’t, these trades still look poised to move, independent of any overhead market pressure.
Hopefully, by finding out about these two setups and the delta neutral trading philosophy, you’re able to trade more confidently in these uncertain times.
There will undoubtedly be more bumps along the road over the next month or two, but armed with MNST and ROL, at the very least, you’ve got two A+ setups that have a chance to “blast-off” for big short-term gains while buy and hold investors pray for a recovery.