CREE has broken a long downtrend line and formed a nice bull flag this week. It has a very bullish weekly and daily chart and is one of the few momo names out there that is not damaged too much from the recent correction in the markets. This stock moves around alot so just know that. The stock reversed higher Tuesday with the market and closed near the highs. It held a retest of the 50 and 21 day ema's as well. The 65 level is huge support for this pup. I like a short term directional play here with some deep in the money calls like the 65s if this stock breaks above the 70 resistance level or pulls back a bit to the 8-ema at 67ish. Which ever happens first. I also like the stock for the longer term and would consider looking at some Sept or Dec calls and/or call spreads.
For the featured trade I think CREE can easily test the mid 70s in the coming weeks before consolidating and eventually challenging the 52 week high of 83 and change. If this is indeed the end of the correction the market has endured then you want to look at the weekly charts of strong bullish momo names like CREE as they will respond the fastest and sharpest in any rally.
Buy the Sept/Aug 75 call calendar spread for a net debit of $1.11. By going long the Sept 75 call and shorting the Aug 75 call you create a spread and lower your risk.
This trade makes money anywhere between 68-83 when August expiration rolls around. This is a very wide range to be able to make money. Of course the trade maxes out at 75 at expy as your short call ideally, expires worthless and you hang on to the Sept call or just close it out for a profit. One thing to keep in mind is the CREE reports earnings on 8/10 so if you plan on holding into that just understand the risk. Or just get out prior to the report especially if you are in a profit.