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Sometimes the market hands you setups that are almost too good to pass up. That’s exactly what I’m seeing with Fortinet (FTNT) right now — a textbook gap fill opportunity that’s got all the right ingredients for a solid trade.
Here’s what caught my attention…
Fortinet got absolutely beaten down on earnings last month, creating one of those classic gap situations we love to see. The stock entered that gap fill range just a couple days after the initial drop, and while it’s been relatively quiet since then, I’m noticing some encouraging signs that momentum might be shifting back in our favor.
Technical Setup Shows Promise
The Newton indicator just flipped back to positive, which means momentum is now green on Fortinet. That’s the kind of technical confirmation I want to see before entering a gap fill play.
What makes this setup even more attractive is that the gap fill sits under the 200-day moving average, which historically makes it easier for the stock to reach that target level.
I love this stock for gap fill strategies because it tends to follow through on technical patterns. The recent earnings-driven sell-off created the perfect storm for a bounce back toward those gap levels.
Conservative Trade Structure
For this play, I’m buying the Oct. 17 expiration, $89 strike call, and selling the $90 call, creating a tight spread that targets just the half gap rather than the full gap. Why not go for the complete gap fill?
Simple — there’s a conflict with upcoming earnings that I’d rather avoid.
The spread is still available at a 29-cent debit, which gives us 71 cents over 29 cents for a potential 244% ROI. This trade only requires about a $5 move in Fortinet over the next month, which represents roughly 5-6% upside.
Given the technical setup and the gap fill dynamics, that’s a reasonable expectation.
Risk management is key here. By targeting the half gap instead of pushing for the full gap, we’re keeping things conservative and avoiding potential earnings volatility that could work against us.
Sometimes the best trades are the ones where you leave a little money on the table in exchange for better risk control.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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