DailyPlay – Conditional Opening Trades (LOW) – November 16, 2022

LOW Conditional Bullish Opening Trades

We list the two Conditional trades for LOW separately.

View LOW Conditional (1) Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 1 Contract Dec. 9th $200/$190 Put Vertical Spreads @ $2.43 Credit.

Total Risk: TThis trade has a max risk of $757 (1 Contract x $757).

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

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 89

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. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF we see LOW trading down near $200. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

View LOW Conditional (2) Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts Dec. 9th $195/$190 Put Vertical Spreads @ $1.08 Credit.

Total Risk: This trade has a max risk of $1,176 (3 Contracts x $392).

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

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 93

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. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF we see LOW trading down to $195. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

Investment Rationale

A better than expected PPI number again gave bulls a reason to buy stocks, with the SPX gaining another 34 pts. on Tuesday to 3992, its highest close since early September. Nine of eleven macro sectors were up, led by Communication Services and Consumer Discretionary names. (Almost half of these combined sector weightings come from just 4 stocks: META, GOOGL, AMZN, and TSLA).

I disagree with those who think that we’ve started a whole new bull market.  In my opinion, the Fed will not pivot; 2023 earnings estimates still need to decline; recession is still a distinct possibility, and the general trend remains lower.  In fact, when I look at the daily SPX chart, I see a Setup +6 and a Countdown +11, suggesting that by week’s end we could already be starting to top this move out. Also note the daily TDST line at 4110 and the most recent Propulsion Full Exhaustion target at 4118 – both potential resistance trading targets, too.

SPX – Daily

Lowes (LOW) reports today before the open, and will hold its conference call at 9am ET. So by the open, we should get a pretty good sense of initial reactions to the data and guidance. Looking at its chart, and what Tony identified as decent fundamentals for it in yesterday’s webinar, I think we could see the $200 to $195 area tested on a pullback. Given the recent low volume near that price, should we see LOW trading down near $200 today, let’s look to sell a Dec. 9th $200/$190 put spread (on half the amount of exposure we normally do) for whatever the current bid/offer mid price is on the spread at the time. Should it get down to near $195, we’ll put on the other half of the trade by selling a Dec. 9th $195/$190 put spread for whatever the then current bid/offer mid price is at the time. So, two potential sales of put spreads (to possibly enter during the balance of the week) to equal the total exposure you’d normally put on for one option spread trade IF and only if we see a decent pullback.

LOW – Weekly