DailyPlay – Opening Trade (CRM) – July 28, 2022

Bullish Opening Trade Signal

View CRM Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 2 Contracts Sept 2, 2022 $175/$160 Put Verticals @ $4.38 Credit.

Total Risk: This trade has a max risk of $2,124 (2 Contracts x $1,062 per contract).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a bullish trend. 

1M/6M Trends: Bullish/Neutral

Technical Score: 4/10

OptionsPlay Score: 87

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

The FED has spoken, and although they raised rates by the expected 75 bps., investors were pleased with what Chairman Powell said to ease fears that the economy is not in trouble, moving ever more so dovish-ly as his press conference went on. By the day’s end, the SPX added 2.6% and the Nasdaq a whopping 4%.

As I said in an interview on Tuesday with IG TV in Europe (here’s the link: https://www.ig.com/uk/market-insight-articles/beat-the-street–pre-us-market-open-live-show-220726)

To me, the more the market now rallies, the more the Fed will feel comfortable raising rates later this year. And as such, it would imply that stocks can eventually fall under the pressure of those higher rates, which would also likely lead to more layoffs and the consumer having a more difficult time paying for things than they even have now. If that were to come along with gas prices getting back over $5 – and possibly heading even higher than that (it recently reached over $10/gallon equivalent in the UK) – the Fall could see “The Fall” in equity prices that make new 2022 lows.

But in the meantime, I have been near-term bullish, having suggested that the SPX’s four weeks in a row with roughly the same low (starting the week after the 2022 low was made) was enough to start a move higher – along with now a second week in a row closing above the weekly cloud model’s Conversion Line (another piece of the puzzle I said would be needed to improve the bullish picture). 

As such, let’s look to sell a Salesforce (CRM) Sept. 2^nd $175/$160 put spread (yesterday the mid- price closed at $4.38).  This gives us some breathing room if we see some pullback from Wednesday’s large gains (the stock closed at $180.30), but I’m thinking this could run up to its Base Line (in orange), currently near $194+.

CRM – Weekly