DailyPlay – Opening Trade (GOOGL) – May 11, 2023

GOOGL Bullish Opening Trade Signal

View GOOGL Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 6 Contracts June 16th $112/$122.50 Call Vertical Spreads @ $3.24 Debit per contract.

Total Risk: This trade has a max risk of $1,944 (6 Contracts x $324) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $324 to select the # contracts for your portfolio.

Trend Continuation Signal: This stock is bullish and we expect this trend to continue.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 110

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 these prices are based on Wednesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

After what looked to be a very surprising non-positive reaction to the better-than-expected CPI number yesterday, investors pushed forward over the final 2.5 hours of the trading day to send stocks out higher – but still beneath the high of the day that was made just after the open. The bulls will claim victory – and it was a mild one – but it was a fairly reluctant one. In fact, one of the sentiment figures I watch actually showed less S&P 500 bulls after Wednesday’s session than there were after Tuesday’s close. It’s just another indicator of just how fickle this market remains.

A reminder that the PPI figure comes out this morn at 8:30am ET. Here is the consensus forecast:

One of the names that looks like it could be picking up some upside momentum is Alphabet (GOOGL). To me, there are two important resistance levels within striking distance: 1) the top of the weekly cloud ($117.44) and, 2) where the Lagging Line would hit the top of its cloud in a few weeks ($126.71). As such, let’s look to get long the June 16th $112/$122.5 call spread. It went out yesterday at $3.24 mid, or some 31% of the strike differential. (Though the VIX remains depressed, many names do not have “cheap” calls. The play I laid out is not expensive, but it’s not a bargain either. This is one of the problems when the VIX gets “cheap”, as calls are bought up on any name that looks even remotely promising.) We’ll probably take off some of the trade when/if the cloud top gets tested, and then more if the $126 area comes into play.

GOOGL – Weekly