DailyPlay and Adjusting Trade (MS, SHW) – Feb 17, 2022

Adjusting Trade

• SHW – 90% Loss: March 18, 2022 $290/$270 Put Vertical​​​​​​​​ @ $13.30 Debit. Close half of this position. For example, if 10 contracts were opened for this trade, we recommend closing 5 contracts.

View MS Trade

MS Bearish Opening Trade Signal

Strategy Details

Strategy: Call Credit Spread

Strategy Direction: Bearish

Details: Sell to open April 1, 2022 $102/$109 Call Vertical @ $2.53 Credit Limit Order

Counter Trend Signal: This is a bearish strategy on a stock or ETF that is experiencing a bullish trend. 

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 95

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade.

Investment Rationale

MS is part of the Investment Banking and Brokerage sub-industry outlook which experienced strong momentum in global capital markets in 2021. However, this momentum is expected to decelerate in 2022. Risks for MS include an equity bear market which would likely put a dent in investor participation.

Though Morgan Stanley (MS) made new all-time highs just a week ago, it has since come off almost 7% and is really right back into its sideways range that it has been in since last August (see the horizontal purple-colored lines). It finds itself now beneath its middle daily Bollinger Band and it again just made a negative MACD cross. We are not outright bearish, but more thinking that there is little catalyst for this to now make new all-time highs in coming weeks. Therefore, we will look to sell the April 1 $102/$109 call vertical spread for a $2.53 credit (last night’s closing spread differential). This price represents 36% of the $7 strike spread – a small above-average income figure we’d expect on selling a credit spread.

Rick Bensignor

Chief Market Strategist