You Could Earn 15% in 45 Days to Exercise Patience on Stoneco
So many stocks are overbought currently that it’s hard to find a good stock to buy without being concerned about a short-term pullback. I ran a scan of S&P 500 stocks on January 6, and 320 members of the index have weekly stochastics readings above 70. The rally in the overall market over the last few months has created the current situation.
Each month I build a list of stocks that meet certain fundamental requirements and then I keep an eye on the weekly charts, trying to find a good entry point to buy the stocks that I am interested in. Over the last few weeks, it has become harder and harder to find stocks that I like AND like the current price.
I can exercise patience and wait to see if the stock pulls back, or in some cases I can write puts on the stock and see if the stock drops down to what I see as a support level. In some cases, it doesn’t make sense to write the puts because the reward for making the trade doesn’t outweigh the risk. One stock that hit my radar in the last few days that I believe it makes sense to write puts on is Stoneco Ltd. (STNE). The fintech software company has rallied sharply since May, but it is tremendously overbought.
There is a trend line that connects the lows from the last seven months and that trend line is down near $65 at this time. The stock is currently trading just above $80, so we are talking about a difference of 18.75% between the current price and the trend line.
The February $67.50-strike puts are selling for $1.25 currently, or $125 per option contract, and the margin requirement to sell the puts is $800. If the options expire worthless on February 19, that would mean a return on margin of 15.6% in just 45 days.
As far as I’m concerned, the key to writing options is that you have to like the stock and want to own it. The fundamentals have to make sense and make it attractive. If we look at Tickeron’s Fundamental Analysis screener, Stoneco scores well on its P/E Growth Rating and the SMR Rating, Outlook Rating, and Price Growth Rating is average. The Valuation Rating and the Profit vs. Risk Rating are both poor, but that goes along with the overbought levels we see on the chart. Should the stock drop 15-20%, those ratings should improve.
On the technical side, Stoneco has received short-term bearish signals from five different indicators in the last 11 days. This suggests that a pullback is coming.
If the technical indicators are right and the stock does fall, it can fall all the way down to $67.50 and those investors that wrote the puts will still earn the 15.6% return on margin. If the stock drops below the $67.50 strike price, 100 shares of the stock can be assigned to the writer of the puts for each option they sold. If this happens, the investor now owns the stock with an entry price of $66.25. The strike price is the purchase price, but investors received $1.25 for selling the puts.
The entire outlook from Tickeron appears below and personally I like the idea of getting paid to wait for a better entry point on Stoneco.
Momentum Indicator for STNE turns positive, indicating new upward trend
STNE saw its Momentum Indicator move above the 0 level on June 10, 2025. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 79 similar instances where the indicator turned positive. In of the 79 cases, the stock moved higher in the following days. The odds of a move higher are at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for STNE just turned positive on June 16, 2025. Looking at past instances where STNE's MACD turned positive, the stock continued to rise in of 49 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where STNE advanced for three days, in of 292 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 202 cases where STNE Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The 10-day RSI Indicator for STNE moved out of overbought territory on June 25, 2025. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 33 similar instances where the indicator moved out of overbought territory. In of the 33 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 9 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where STNE declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
STNE broke above its upper Bollinger Band on June 24, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. STNE’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.793) is normal, around the industry mean (31.860). P/E Ratio (26.076) is within average values for comparable stocks, (164.301). Projected Growth (PEG Ratio) (0.000) is also within normal values, averaging (2.732). Dividend Yield (0.000) settles around the average of (0.030) among similar stocks. P/S Ratio (2.365) is also within normal values, averaging (62.072).
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. STNE’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 88, placing this stock worse than average.
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General Information
a financial technology solutions provider
Industry PackagedSoftware
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