DailyPlay – Conditional Opening Trade (OIH) – May 23, 2023

OIH Conditional Bullish Opening Trade Signal

View OIH Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts June 16th $265/$255 Put Vertical Spreads @ a current cost basis of $3.80 Credit per contract.

Total Risk: Based on the current cost basis this trade has a max risk of $1,860 (3 Contracts x $620) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $620 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is neutral to bearish and expected to break out above resistance levels.

1M/6M Trends: Neutral/Bearish

Technical Score: 3/10

OptionsPlay Score: 87

Condition: Open this trade when OIH closes above $267.07 today or above $266.14 tomorrow.

Investment Rationale

A pretty quiet day in the market on Monday saw the Dow fall 42 bps., but rallies in the SPX and NDX. Apple caught a downgrade from Loop Capital, and the biggest of all US companies by market cap fell 55 bps. after last week marking the highest high since April ’22. It’s not the craziest place for a downgrade, based upon its historical chart (below), as the analyst there is looking for AAPL to miss their next earnings estimate.

AAPL – Weekly

Investors await the FOMC meeting minutes on Wednesday afternoon, and of course, more news on the debt-ceiling negotiations. (Listen to my thoughts on them in the replay video of Monday’s weekly market outlook webinar.)

I have dramatically trimmed down our portfolio holdings, with the recent gains forcing us out of prior bearish bets. One good play we do have on is in GOOGL. With price getting very close to where the weekly cloud’s Lagging Line would hit resistance against the top of its respective cloud (at $126.71), let’s trim 1 of 3 remaining call spreads today, up 83% on it.

GOOGL – Weekly

Our EBAY short $44/$41 put spread trade may just work out after all. Our play expires a week from this Friday, and here’s what the current chart looks like:

EBAY – Daily

For a new trading idea, let’s look at the Oil Services Index ETF (OIH). It has already broken above one downtrend line, and is on the cusp of breaking out above the higher of the two ones on a close today above $267.07 or above $266.14 tomorrow. If either of those happen, let’s sell the June 16th $265/$255 put spread at then bid/offer mid-price. As of last night, that closed at $3.80, or 38% of the strike differential. (By the way, to show you just how overpriced calls are, the same dated $265/$285 call spread costs the identical 38% as the $10-wide put spread we will potentially enter today for a 38% credit.  This is another example of calls costing just too much these days.)