Closing Trade

• PYPL – 63.87% loss: Sell to Close 9 Contracts (or 100% of your Contracts) June 21st $65/$72.50 Call Vertical Spreads @ $0.86 Credit. DailyPlay Portfolio: By Closing all 9 Contracts, we will receive $774. We opened these 9 Contracts on April 23 @ $2.38 Debit. The average loss, therefore, is $152. 

DailyPlay Portfolio Review

Investment Rationale

As equity markets rally today on the back of NVDA earnings, we continue to monitor our DailyPlay portfolio for alerts to cut losses and manage the trades. PYPL crossed below a key support level yesterday and requires us to close out the position, while our PLTR, RACE and ADBE positions improved yesterday. We will continue to monitor our portfolio for new opportunities and adjustments. 

Our Trades

ADBE – 29 DTE

Bullish Credit Spread – ADBE traded above $480 support during all trading sessions this week, and a break higher is therefore likely.

NKE – 29 DTE

Bullish Debit Spread – Support around $90 is holding and a move higher should ideally happen within the next few trading days, to support our bullish thesis.

PLTR – 29 DTE

Bearish Debit Spread – Trends remain bearish and a break below $20.50 would likely fill the gap toward $18.

PYPL – 29 DTE

Bullish Debit Spread – As support at $63 failed, we are closing this position today.

RACE – 57 DTE

Bearish Debit Spread – RACE gained over a percentage point since we opened this bearish trade. Our first price target is $400.

Closing Trades

• BIDU – 59.42% loss: Sell to Close 4 Contracts (or 100% of your Contracts) July 19th $115/$135 Call Vertical Spreads @ $2.39 Credit. DailyPlay Portfolio: By Closing all 4 Contracts, we will receive $956. We opened these 4 Contracts on May 6 @ $5.89 Debit. The average loss, therefore, is $350. 
• GM – 51.30% loss: Sell to Close 9 Contracts (or 100% of your Contracts) June 21 $45 Calls @ $1.12 Credit. DailyPlay Portfolio: By Closing all 9 Contracts, we will receive $1,008. We opened these 9 Contracts on April 26 @ $2.30 Debit. The average loss, therefore, is $118. 

Investment Rationale

I want to address our current DailyPlay portfolio which holds 6 unrealized losing positions. Understandably, this has raised questions and is a learning opportunity for every trader. We have not been in such a position since the March 2020 selloff and our realized profits records speak for themselves. However, every trader will come across a point where you are faced with a series of consecutive losses. The short answer is that the best course of action is to stick with our Stop Loss rules and continue trading. We are only able to afford this if we followed the rules for position sizing when we entered these trades. The all-important 2% rule which is included with every trade signal ensures that even when you are faced with a series of losses, you are able to survive them and emerge on the other end and continue trading. Even if all 6 positions triggered their stop loss levels it would only result in a 6% drawdown in our portfolio. As we review our DailyPlay portfolio, BIDU and GM triggered their stop loss levels yesterday and require us to close those out. 

To review the 2% rule and how we build a profitable portfolio, please review my recent webinar on this topic, by clicking HERE. 

RACE Bearish Opening Trade Signal

Investment Rationale

The popularity of Formula 1 can’t be overstated these days, but my favorite racing team Ferrari is expensive and I’m concerned that it’s due for a pullback in this environment. Ferrari has rallied over 25% this year after posting better-than-expected earnings, but this rally is starting to look overdone and I think it’s at risk of trading lower. 

Technical Analysis

The stock has rallied 25% this year so far, more than double what the S&P 500 has returned. However, there are classic signs of a potential bullish to bearish reversal. Firstly we have what looks like a head and shoulders reversal pattern that has completed with a neckline at $410. This would indicate a potential reversal to fill the gap at $355 (a 13.6% decline). This is coupled with relative underperformance to the market, a signal for potential weakness ahead, and MACD remains negative for RACE.  

RACE – Daily

Fundamental Analysis

What’s interesting about Ferrari’s business is how resilient the ultra-luxury market has been to recent downturns. This is part of why RACE has continued to command a premium valuation relative to its peers. However, 48x forward earnings are simply detached from reality when EPS is expected to grow at 15% over the next few years. That’s a valuation that is nearly 140% higher than the average S&P 500 stock.

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 2 July 19th $420/$390 Put Vertical Spreads @ $9.55 Debit per Contract.

Total Risk: This trade has a max risk of $1,910 (2 Contracts x $955) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $955 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is over-bought and expected to pull back from recent highs.

1M/6M Trends: Mildly Bullish /Neutral

Relative Strength: 6/10

OptionsPlay Score: 130

Stop Loss: @ $4.78 Credit. (50% loss of premium paid)

View RACE 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 Monday’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 RACE Trade

DailyPlay Portfolio Review

Investment Rationale

As equities continue its grind higher, we remain positioned in our DailyPlay Portfolio for further upside. With all positions currently with an unrealized loss, we are taking this time to be patient as we are long-time decay but have plenty of time left in all of our positions. 

Our Trades

ADBE – 32 DTE

Bullish Credit Spread – ADBE traded above $480 support over the last two trading sessions, and a break higher is therefore likely.

BIDU – 60 DTE

Bullish Debit Spread – Again trading above $110 and an upside move should target $120.

GM – 32 DTE

Bullish Calls – Completed a bullish pennant and a break higher seems likely.

NKE – 32 DTE

Bullish Debit Spread – Support around $90 is holding and a move higher should ideally happen within the next few trading days, to support our bullish thesis.

PLTR – 32 DTE

Bearish Debit Spread – Trends remain bearish and resistance at $22 is still holding.

PYPL – 32 DTE

Bullish Debit Spread – With the price remaining above $63, a move higher is still possible. However, we will closely monitor this trade as increased strength is needed for a move higher.

Investment Rationale

Markets have continued to provide a risk-on signal after this week’s CPI print and our CRM position has now rallied above the $280 major resistance level that we wanted to see hold. Despite not yet triggering our stop loss levels we believe it is best to cut this position at the moment and not hold onto a bearish position in this market where time decay is working against us. 

Closing Trade

• CRM – 30.81% loss: Sell to Close 4 Contracts (or 100% of your Contracts) June 21st $270/$250 Put Vertical Spreads @ $4.02 Credit. DailyPlay Portfolio: By Closing all 4 Contracts, we will receive $1,608. We opened these 4 Contracts on May 13 @ $5.81 Debit. The average loss, therefore, is $179. 

Yesterday’s retail sales numbers that disappointed and CPI print that came in line with expectations kept the door open for a rate cut in September. This was the boost that equities required to breakout to new all-time highs.

Our portfolio is positioned for a continuation higher in equities and we simply have to exercise some patience for your trades to come to fruition. With 7 open positions, we will not look to add additional exposure to our portfolio today. 

All eyes are on the CPI print this morning. Yesterday’s PPI print gave us a glimpse into what might be coming down the line with healthcare and airline costs moderating. There are hopes that today’s CPI print will come in line and not surprise to the upside and provide the support equities need to break out to new all-time highs.

With our portfolio positioned for further upside in equities, we will not add any new positions until after the CPI print. If inflation does surprise toward the upside, we will likely cut our NKE position. 

DailyPlay Portfolio Review

Investment Rationale

Despite markets ending flat on the day, our long positions all improved as we head into tomorrow’s all-important CPI print. With 5 long positions and 2 short positions, we do not feel that we need to add further exposure into tomorrow’s CPI print. Please review our Monday Morning Macro Research Webinar if you missed that session as we covered the CPI’s impact on our outlook and a review of our DailyPlay positions. 

Our Trades

ADBE – 38 DTE

Bullish Credit Spread – ADBE is still holding onto support at around $475. A break above $490 would confirm our bullish bias on this trade.

BIDU – 66 DTE

Bullish Debit Spread – Had a strong move higher yesterday and a break above $115 would target $125.

CRM – 38 DTE

Bearish Debit Spread – Resistance at $280 is holding. A break below $270 would target a price of $250 – $260.

GM – 38 DTE

Bullish Calls – GM is currently consolidating but trends remain constructive for a breakout above $46.

NKE – 38 DTE

Bullish Debit Spread – Despite reversing since our entry, it continues to make higher lows and targets a break above $95.

PLTR – 38 DTE

Bearish Debit Spread – Trends remain bearish and we’re looking for a continuation lower toward our $18 target.

PYPL – 38 DTE

Bullish Debit Spread – The trend has deteriorated since our entry, a close below $63 would warrant looking at closing at a loss.

CRM Bearish Opening Trade Signal

Investment Rationale

Once a darling of the tech industry, Salesforce fell out of favor until recently when it hit a new all-time high earlier this year. However, since then, investors have continued to shy away from this cloud computing stock as they focus on more pure AI-related companies and Salesforce is at risk of turning lower again. As CRM matures and growth rates moderate, it simply cannot continue to command the industry-leading valuations it once did and has to face the reality of its fundamentals. 

Technical Analysis

CRM has traded in a wide range of $130 to $310 over the past 5 years. Earlier this year it revisited the upper bound of the range and attempted to breakout higher to a new all-time high. This quickly failed and the stock has reversed back into the range with momentum recently turning negative after gapping lower. Now $280 resistance level looks like it will hold and suggests that CRM will likely continue to trade towards the midpoint of the range in the $210-220 area.

CRM – Daily

Fundamental Analysis

CRM currently trades at over 28x forward earnings, which flies in the face of the growth rates that have moderated significantly over the past 12 months. After averaging EPS growth of over 45% over the past 3 years, future EPS growth is expected to slow to just a third of that of that at 16%. And Revenue growth is expected to slow to under 10%. This makes a valuation that is 40% higher than the S&P 500 harder to justify when growth rates are slowing down significantly.

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 4 Contracts June 21st $270/$250 Put Vertical Spreads @ $5.58 Debit per Contract.

Total Risk: This trade has a max risk of $2,232 (4 Contracts x $558) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $558 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is currently neutral.

1M/6M Trends: Neutral/Neutral

Relative Strength: 8/10

OptionsPlay Score: 127

Stop Loss: @ $2.79 Credit. (50% loss of premium paid)

View CRM 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 Thursday’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 CRM Trade

DailyPlay Portfolio Review

Investment Rationale

As buyers seemingly take back control of the equity markets, $5250 is the upside target on the S&P 500. With 5 out of our 6 DailyPlay positions with long exposure, we will take a pause from adding new positions and wait for those to start performing. Most of our positions are within a couple of percentage points of breakeven and we are going to hold them going into next week’s CPI print.

Our Trades

ADBE – 42 DTE

Bullish Credit Spread – A recent pullback to its $480 support level should see it stabilize and start to resume its bullish trend. 

BIDU – 70 DTE

Bullish Debit Spread – Look for a retest of its $114 resistance level and for it to continue higher after bouncing off its $108 support.

GM 42 DTE

Bullish Calls – Consolidating just below its key $46 resistance level, we are positioned for a breakout higher.

NKE 42 DTE

Bullish Debit Spread – We are positioned for the break above $94.30 and targeting $100 to the upside gap fill.

PLTR 42 DTE

Bearish Debit Spread – Our bearish thesis for this trade has been confirmed and it seems likely that the gap towards $18 could be filled.

PYPL 42 DTE

Bullish Debit Spread – As PYPL bounced off a key level of $63, a continued upside is still on the table. We will keep a close eye on this position.