DailyPlay – Opening Trade (MS) – June 26, 2024

MS Bullish Opening Trade Signal

Investment Rationale

As we approach the end of the quarter and earnings season is ramping back up, banks are on the docket first. After outperforming the S&P 500, financials have lost ground over the past few weeks to technology, but started to play catchup this week. Morgan Stanley recently pulled back to a major support level and looks attractive from a risk/reward perspective to add long exposure as financials start to show performance again. 

Technical Analysis

Morgan Stanley recently broke out above a major resistance level at $92-94 that has been in place for over a year and recently just retested it as support. With a potential breakout above its $98 resistance level, MS is setup to potentially retest its all-time highs around $110, our upside target. 

MS – Daily

Fundamental Analysis

From a valuation perspective, MS is trading on the upper end of its historical range at 1.7x book value. However, it is expected to grow at a healthy clip relative to its peers with 8% EPS growth and 3-4% Revenue growth expected over the next few years. Additionally, if lighter capital rules are put in place by the Fed from its annual stress test, it would be a significant positive factor for banks such as MS. 

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 7 Contracts August 2nd $97/$92 Put Vertical Spreads @ $2.01 Credit per Contract.

Total Risk: This trade has a max risk of $2,093 (7 Contracts x $299) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $299 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is trading higher and is expected to break out above a level of resistance.

1M/6M Trends: Bullish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 105

Stop Loss: @ $4.02 Debit. (100% loss to the value of premium received)

View MS Trade

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 Tuesday’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. 

View MS Trade