View Closing Trades

Closing Trades

• WFC – 48% Gain: Short Nov 26, 2021 47/50 Put Verticals @ $0.55 Debit

DailyPlay Positions Outlook:

Equities continue their charge higher with SPY and QQQ both touching all-time highs yesterday once again. We notice a slight narrowing in leadership compared to recent weeks. While this is no cause for concern yet, continued narrowing leadership does pose more downside risks. We are taking this opportunity to take profits on our WFC bullish position as it has reached our take profit level after breaking out of resistance. 

Prakash Vijayanath
Analyst at OptionsPlay

View DPZ Trade

Market Outlook:
After a big week for big tech with regards to earnings, the major equity indices ended the week at new all time highs. AAPL and AMZN disappointed on earnings after the bell on Thursday causing both SPY and QQQ to open lower, but strong momentum carried the indices 0.2% and 0.5% higher respectively. The next major event will be the Fed’s 2 day meeting this Tuesday – Wednesday which is expected to cause some volatility as markets prepare for a tapering of monetary policy. Sector rotation remains relatively healthy and indicates broad market participation. Rotation into Discretionary remains strong with Healthcare, Tech, and Real Estate also providing leadership. Sectors to avoid are Communications and Staples, both of which are showing weak momentum and relative strength.

DPZ Bullish Trade Idea:
Our bullish trade idea today is Dominos Pizza Inc (DPZ). DPZ is part of the Consumer Discretionary sector which is the strongest sector currently and is outperforming on strong momentum and relative strength against the market. Price recently rallied to a minor resistance level at $489 and strong momentum on both the weekly and daily timeframes indicates that this level will be broken. From a fundamental perspective, DPZ has been successful in utilizing its digital assets to gain market share in international markets. 

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

• Take Profit: $5.10 Debit
• Stop Loss: $20.40 Debit

View DPZ Trade

Closing Trade

• AAPL– 6% Loss: Short Nov 19, 2021 149/155 Call Vertical @ $2.20 Debit

Despite AAPL’s initial gap down on Friday’s open, price rallied intraday with strong momentum. Our bearish thesis for Apple’s earnings play was based on supply-side constraints and deceleration in services revenue which was confirmed during the announcement. However, bullish price action after the gap lower on Friday has invalidated our thesis and we take this opportunity to close out AAPL for a limited loss. 

Prakash Vijayanath
Analyst at OptionsPlay

Adjustment Trade

C Trade Adjustment – 29% Unrealized Loss. Roll October 29, $72 Call to November 19, $73 Call to collect more premium:

• Buy to close October 29 $72 Call @ $0.04 Debit
• Sell to open November 19 $73 Call @ $0.66 Credit
• This results in a reduced cost basis for the C Call Diagonal Trade from $3.81 to $3.25. 

DailyPlay Positions Outlook:

The short leg of the C diagonal spread will expire today and we continue to offset the trade cost of the long C call option by selling an OTM call to reduce the cost basis of the C Dec 17 $70 Call and collect more premium. This results in a new cost basis of $3.25 for the C diagonal trade. 

As a volatile earnings week comes to a close with most of the “Big Tech” names reporting a mixed bag of earnings, the major indices continue to grind higher. However, disappointing outlooks for AMZN and AAPL’s earnings yesterday after the bell will likely result in SPY and QQQ opening lower with some volatility expected this morning. 

Prakash Vijayanath
Analyst

View PDD Trade

The bearish DailyPlay for Thursday, October 28th is Pinduoduo Inc (PDD). PDD’s exposure to Chinese markets continues to weigh on performance. 

Technical View

• Failed retest at 100 D EMA and strong decline. 
• Bearish 1M and 6M trends
• Very weak technical score – 2 out of 10

Fundamental View

• Increased regulation in China poses a risk for growth 
• High exposure to Chinese markets. Demand is expected to be negatively impacted.
• Earnings Nov 24 

As this is a Credit Spread, look to take profits at 50% and cut losses at 100%:

• Take Profit: $1.95 Debit
• Stop Loss: $7.80 Debit

View PDD Trade

View Closing Trades

Closing Trades

• LUV – 80% Loss: Long Dec 17, 2021 52.5/60 Call Vertical @ $0.40 Credit

DailyPlay Positions Outlook:

The major indices suffered losses during the last hour of trading yesterday which saw SPY declining towards the $450 support and QQQ once again rejecting all-time highs at $382 to end the day at $380. Big Tech earnings is set to continue this week and will provide direction in the short term for equities as we have Apple and Amazon both reporting at the end of the day. 

We take this opportunity to close out LUV for an 80% loss. LUV invalidated our bullish thesis yesterday after breaking below the $47 support level.

Prakash Vijayanath
Analyst at OptionsPlay

View Closing Trades

Closing Trades

• PTON – 29% Gain: Long Dec 17, 2021 80/85/105 Call Spread Risk Reversal @ $5.50 Credit
• KWEB – 16% Loss: Long Dec 17, 2021 50/58 Call Verticals @ $2.45 Credit
• AMAT – 90% Loss: Short Nov 5, 2021 130/140 Put Verticals @ $6.53 Debit

DailyPlay Positions Outlook:

As earnings season continues, equities remain elevated with what has been a surprisingly positive Q3 for the majority of companies in the S&P 500 so far. The tech giants are set to provide an additional boost for the major indices with Alphabet and Microsoft both posting encouraging numbers. SPY and QQQ continue to grind higher with SPY pulling back slightly from session highs yesterday and the Nasdaq 100 inching closer to its previous all-time high. 

We take this opportunity to close out PTON for a 29% gain before earnings next week. KWEB failed to breakout thus invalidating our bullish thesis and will be closed for a limited loss. AMAT failed to breakout higher as well and price action remains rangebound. 

View AAPL Trade

The bearish DailyPlay for Tuesday, October 26th is Apple Inc (AAPL). AAPL is part of the Technology Sector (XLK) which has experienced a 1.4% rally in the last month. Please note that this is a bearish earnings play on AAPL which will release earnings this Thursday.

Technical View

• Failing to break above $150 resistance
• Slowing momentum after a sharp rally. 
• Credit Spread collects 34.5% of vertical width. 

Fundamental View

• 14% of Apple’s production base in China has been impacted by power issues. 
• Deceleration in services y/y growth from 33% to 27%. 
• Earnings: Oct 28 (2 Days)

View AAPL Trade

 View FB Trade

Bullish – FB – $324.61

Catch OptionsPlay’s Chief Strategist, Tony Zhang on CNBC, Options Action every Friday at 5:30 PM EST!

Market Outlook:
As we head into earnings season, equities have performed well with the major indices recovering considerably in the last 2 weeks. SPY has rallied back to its previous all-time high at $453 while QQQ ended the week pulling back slightly back to $374. Fundamentals will play a big part this week with 4 out of the 5 FAANG stocks announcing earnings (AAPL, AMZN, FB, and GOOGL). US GDP numbers will also be released on Thursday and will provide additional insight as to how well the economy performed despite headwinds caused by the Delta variant spread, labor shortages, and supply-side constraints. Over the last week, there has been a considerable rotation out of Energy, Staples, and Financials while Discretionary and Tech have seen strong momentum and will likely provide leadership this week.

FB Bullish Trade Idea:
Our bullish trade idea today is Facebook Inc (FB). FB recently pulled back significantly and found support near the $320 level. Price has been under pressure due to SNAP’s disappointing earnings announcement, however, this may be an overreaction when considering that FB and SNAP’s business model is considerably different. Please note that this is an earnings trade with FB announcing earnings today after the market close. View FB Trade

Sector Outlook

The Relative Rotation Graph (RRG) for sector rotation indicates that a broadening sector leadership with 7 sectors in the Improving and Leading categories and 4 sectors in the Lagging and Weakening categories.

Leading (positive relative trend and positive relative momentum): Discretionary, Industrials and Materials. However, only Discretionary showing strong momentum. Weak momentum in Industrials and Materials.

Weakening (positive relative strength and negative relative momentum): Financials and Energy are in the weakening category with poor relative strength and momentum. 

Lagging (negative relative trend and negative relative momentum): Communications and Staples are in this category and continue to experience weak momentum and relative strength. 

Improving (negative relative trend and positive relative momentum): 4 sectors are now in the Improving category – Technology, Real Estate, Utilities and Healthcare which rotated out of the Lagging category on Friday.  

XLV

Healthcare stocks have shown strong momentum this week with the sector rotating out of the Lagging category and into the improving category. Price recently broke above the 100 D MA after a pullback to the $124 area. Look for a continuation of rally back to $236 resistance. 

XLRE

Real Estate recently formed a double bottom at the $44.23 level and bounced higher with strong momentum. Price is currently rallying towards its previous all time high at $48.80. Look for continued rally this week. 

Market Observations

• TSM – Price has failed to break above the 100 D MA on multiple attempts and moved 1.77% lower on Friday. Next support sits at $108.
• CMCSA – Price broke below the $54.50 support level and has since come back to retest it. This provides a good risk/reward bearish entry. 
• DIS – Currently at major support. Look for bullish price action at current levels for further confirmation of long entry. 

View Closing Trades

Closing Trades

• PYPL – 66% Gain: Short Nov 26, 2021 265/285 Call Verticals @ $2.45 Debit
• CVS – 8% Gain: Long Nov 19, 2021 85/92.5 Call Verticals @ $2.83 Debit

DailyPlay Positions Outlook:

Equities have staged a strong rally back to all-time highs on the S&P 500 driven by strong consumer demand and sales. It should be noted that while there is strong positive momentum, it has started to decelerate and show signs of exhaustion. Bond markets have also not shown the same level of optimism and we remain cautiously bullish as volume has declined on this rally. We are taking this opportunity to take profits on our PYPL short and reduce long exposure in our CVS position that has failed to rally higher.