Taking Profits

• SQ – 59% Gain: Short Jan 21, 2022 $190/$210 Call Vertical @ $2.90 Debit

DailyPlay Positions Outlook

Equities continued lower yesterday as investor concerns about the Omicron threat escalate and uncertainty remains with the ongoing Fed meeting. However, the major indices remain within their respective range and have not broken below any support levels which would be concerning. While our overall outlook is still positive for equities, recent price action does provide some evidence of a more neutral sentiment growing. We take this opportunity to close out our bearish SQ trade which exceeded our take profit level yesterday. 

Prakash Vijayanath

Analyst at OptionsPlay

Closing Trades

• TAN– 84% Loss: Long Jan 21, 2022 $95/$115 Call Vertical @ $0.95 Credit

Equities started the week on a negative note with both the SPY and QQQ rejecting their respective resistance areas and ending the day in the red. While our outlook still remains positive for equities, the threat of the new variant is causing concern, especially in Europe. We continue to see rotation into defensive sectors (Utilities, Staples, and Real Estate). We take this opportunity to cut losses on our TAN trade that broke below the $93 support level and is failing to show evidence of a reversal higher. 

Prakash Vijayanath
Analyst at OptionsPlay

View TWLO Trade

Market Outlook:

Equities were able to stage a strong recovery last week with both the SPY and QQQ rallying to their respective resistance areas at $470 and $400. Momentum remains strong and this could lead to a break above these levels should the macro picture remain positive. While the Omicron variant is still an unknown, markets have brushed that to the side and continue to focus on strong earnings that are still providing tailwinds for equities as we approach the new year. We saw significant sector rotation last week with more sectors such as Real Estate, Staples and Utilities rotating into the leading category and providing broadening leadership for equities. Small caps continue to remain on the back foot despite a strong rebound for IWM at $213. Price posted a 2nd consecutive day of declines as small caps continue to underperform against the large-cap names. Bonds have also sold off as the Fed shifts to a more hawkish undertone. Overall, the outlook for equities remains positive until the year-end. 

TWLO Bearish Trade Idea:
Our bearish trade idea today is Twilio (TWLO). From a technical perspective, TWLO broke below the major support area at $280 with strong bearish momentum and has recently retested this area. Price action is bearish which is in line with our view that $280 is acting as resistance. This provides a good risk/reward bearish opportunity for a move lower with the next area of support at $220. Both 1M and 6M trends are bearish and with a technical score of 3 (out of 10), TWLO is a weak stock that will likely move lower. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profit: $3.50 Debit
• Stop Loss: $14.00 Debit

View TWLO Trade

Taking Profits

AA – 48% Gain: Short Dec 31, 2022 $47/$42 Put Vertical @ $1.03 Debit

View GLD Trade

The bearish DailyPlay for Thursday, December 8th is the SPDR Gold Trust ETF (GLD). GLD has experienced a long-term bearish trend and a strong decline in recent weeks. Price has retraced higher over the last few days on very weak momentum indicating further downside. 

Both 1M and 6M trends are bearish and with a technical score of 4 (out of 10), GLD is a weak ETF that is expected to move lower from current levels. The next areas of support for GLD are $164 and $161. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profits: $0.87 Debit
• Stop Loss: $3.46 Debit

View SQ Trade

The bearish DailyPlay for Wednesday, December 8th is Square Inc (SQ). Square has experienced a strong decline as valuations remain high but revenue and EPS growth has decelerated significantly. 

Fundamental View

• While longer term fundamentals look promising, SQ is very highly valued which makes it vulnerable to revenue and EPS deceleration having a larger impact on share price – which has been the case. 
• SQ’s Cash App segment currently has 40 million subscribers, a fraction of its main competitor PayPal
• Earnings Feb 24, 2022 (78 days)

Technical View

• Break below $200 major support level and retracement higher provides a good bearish entry point. 
• Weak technical score (3 out of 10)
• Bearish 1M and 6M trends

View SQ Trade

View AMD Trade

The bullish DailyPlay for Wednesday, December 8th is Advanced Micro Devices (AMD). AMD is part of the Technology sector that has experienced a sharp rebound in recent days

Fundamental View

• Meta’s adoption of AMD CPU’s for data centers provides significant upside potential
• Next gen EPYC processor expected to grow market share in this space 
• Earnings Jan 25, 2022 (48 days)

Technical View

• Pullback to an area of support and bounce higher provides a good risk/reward bullish entry
• Very strong technical score (10 out of 10)
• Bullish 6M trend

View AMD Trade

Taking Profits

• IBB – 66% Gain: Short Dec 31, 2022 $154/$161 Call Vertical @ $0.85 Debit

DailyPlay Positions Outlook:

Equities remain resilient at key levels despite the uncertainty regarding the Omicron strain. SPY and QQQ managed to hold on to their key levels in the last two trading sessions and are expected to open higher as new data highlighting that the new variant only showcases mild symptoms in patients provides encouragement for investors. China also cut rates by 50 basis points which provided a boost for global equities as the 2nd largest economy in the world aims to bolster growth after a disappointing year. We take this opportunity to close out the bearish IBB position that has exceeded the take profit level after a strong decline yesterday.

Prakash Vijayanath
Analyst at OptionsPlay

View BA Trade

Market Outlook:

Another week of high volatility saw equities decline significantly on Friday. Both SPY and QQQ moved 0.87% and 1.74% lower respectively but still managed to maintain above key support levels which is encouraging heading into this week. We have seen significant rotation into Utilities and Staples as defensive sectors provide protection against the broader market sell-off. Small caps suffered the most last week ending the week declining over 2% and back to the major $213 support level, once again falling to the year-long range between $213 and $233 which is concerning. Volatility in bonds was also high as TLT broke above the major $151 resistance level with strong momentum sending yields below the 137 basis point level. 

BA Bearish Trade Idea:
Our bearish trade idea today is Boeing (BA). From a macro and fundamental perspective, BA has been on the backfoot due to lack of travel demand caused by COVID as well as the grounding of the 737 MAX airliner due to safety concerns. While we do see the slight improvement in revenues and EPS trends recently, the timing of the new variant causing additional travel restrictions adds further pressure for aircraft demand. We also see Airbus gaining market share in the narrowbody category relative to Boeing. From a technical perspective, BA has broken below the $205 area of support and has failed to break back above it in recent days. Both 1M and 6M trends are bearish and with a technical score of 3 (out of 10), BA is a weak stock that will likely continue lower. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profit: $4.17 Debit
• Stop Loss: $16.70 Debit

View BA Trade

Closing Trades

• WMT – 69% Gain: Short Dec 31, 2022 $143/$148 Call Vertical @ $0.55 Debit

DailyPlay Positions Outlook:

As systemic risks continue to rise due to the ambiguity of the new Omicron variant, we have taken a hands-off approach with the DailyPlay positions this week. Market volatility remains high with the VIX reaching 30 twice this week and with Non-Farm Payroll data being released today, we expect more volatility to end the week. While equities did recover yesterday, downside risks remain and the uncertainty of the new variant has not changed. We take this opportunity to take profits on the WMT trade that was opened this week. 

Prakash Vijayanath
Analyst at OptionsPlay