DailyPlay – Conditional Opening Trade (PANW) – January 23, 2023

PANW Conditional Bullish Opening Trades

View PANW Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 3 Contracts Feb 17th $140/$155 Call Vertical Spread @ $7.32 Debit per contract.

Total Risk: This trade has a max risk of $2,196 (3 Contracts x $732).

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

1M/6M Trends: Neutral/Bearish

Technical Score: 2/10

OptionsPlay Score: 91

Entering the Trade

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

Please note that this is a Conditional trade. The condition that has to be met, before you enter this bullish trade is if we see any minor pullback to the $140 area. Therefore, the price for this trade will be different than what we are showing here, which is only acting as a guideline. 

Investment Rationale

Stocks surged on Friday but again, the SPX closed just beneath its major downtrend line. What a hurdle that has been for bulls to be able to push above. Meanwhile, UST 10yr. yields again held support at its weekly Base Line at 3.42%. To me, that is still the key level to use to determine if rates hold or break further down to 3%. As per a new trade idea for today, I’m looking at Palo Alto Networks, a premier name in the cybersecurity space. Like so many other tech stocks, the past year+ has been painful for stockholders.

PANW – Daily

What I like is that price is back above its May and November lows, where it had previously double-bottomed before hitting sell-stops beneath $140 late last year and into early January. Now that it’s back above there, I’m looking to get long on any minor pullback to the $140 area  — especially if it occurs by Wednesday’s close this week. If it does, let’s look to buy a Feb. 17th $140/$155 call spread at what then is its then current mid-price. Right now, calls are somewhat expensive, and puts are too cheap to sell, but an orderly pullback in price may help make the calls a bit cheaper. PANW reports on Feb. 21st, so we won’t be paying the extra premium for that report by using the 2/17 expiration.