Investment Rationale

As AI-related stocks such as META, ARM, and PLTR fall on the back of investor concerns, DELL continues to buck this trend and we must admit that our thesis and timing were off on this trade. We are going to take this opportunity to close this out at our Stop Loss level and ensure that we keep our losses in check. 

Closing Trade

• DELL – 53.62% loss: Sell to Close 3 Contracts (or 100% of your Contracts) June 21st $120/$100 Put Vertical Spreads @ $3.78 Credit. DailyPlay Portfolio: By Closing all 3 Contracts, we will receive $1,134. We opened these 3 Contracts on April 18 @ $8.15 Debit. The average loss, therefore, is $437. 

Investment Rationale

As equity markets rally back above its 50D SMA, momentum has slowed and leading sectors have lacked participation. We are taking this opportunity to close out some of our long exposure with PDD on this rally as concerns of a pullback are elevated. 

Closing Trade

• PDD – 77.22% gain: Sell to Close 2 Contracts (or 100% of your Contracts) June 21st $115/$140 Call Vertical Spreads @ $16.18 Credit. DailyPlay Portfolio: By Closing both Contracts, we will receive $3,236. We opened these 2 Contracts on April 9 @ $9.13 Debit. The gain, therefore, is $1,410. This translates to a gain of almost 1.5% on our Portfolio.

Investment Rationale

With ADBE rallying 6% from its $465 level since we entered the trade, it is time to take profits on our original credit spread and look to roll this up and out to collect more premium. Our immediate upside target is $525 with extended targets of $570. We will look to continue to collect yield on ADBE as our thesis plays out. 

Closing Trade

• ADBE – 69.43% gain: Buy to Close 1 Contract (or 100% of your Contracts) May 31st $465/440 Put Vertical Spread @ $2.36 Debit. DailyPlay Portfolio: By Closing this Contract, we will pay $236. We opened this Contract on April 22 @ $7.72 Credit. The gain, therefore, is $536.

ADBE Bullish Rolling Trade Signal

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 1 Contract June 21st $460/490 Put Vertical Spread @ $11.12 Credit.

Total Risk: This trade has a max risk of $1,888 (1 Contract x $1,888) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,888 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a mildly bullish trend.

1M/6M Trends: Mildly Bullish/ Bearish

Relative Strength: 2/10

OptionsPlay Score: 91

Stop Loss: @ $22.24 Debit. (100% loss to the value of premium received)

View ADBE 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 ADBE Trade

BIDU Bullish Opening Trade Signal

Investment Rationale

As China’s leader in AI, Baidu trades at a significant discount and presents a rare opportunity for investors to gain long exposure to AI at a bargain-basement valuation. Its LLM AI chatbot ERNIE recently surpassed 200M users which, which includes over 85,000 revenue-generating enterprise clients. We are using the multi-year underperformance of BIDU’s stock as an opportunity to enter an investment with a favorable risk to reward. 

Technical Analysis

Since July of last year, BIDU has declined about 40% but just last week, momentum turned positive and BIDU broke out above its bearish trendline. The immediate upside target is only $117, but a break above that would target $135 and $150 as extended targets. 

BIDU – Daily

Fundamental Analysis

BIDU trades at only 11x forward earnings, despite analysts expecting EPS to grow by 10% and Revenues by 12%. This is despite a very healthy net margin of 15% and an AI user base that has doubled in less than 6 months. As revenues from its AI business start to show up in earnings, I expect BIDU to start trading closer to its median valuation of 18x for its peers.

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 4 Contracts July 19th $115/$135 Call Vertical Spreads @ $5.62 Debit per contract.

Total Risk: This trade has a max risk of $2,248 (4 Contracts x $562) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $562 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a bullish trend.

1M/6M Trends: Bullish/ Mildly Bullish

Relative Strength: 5/10

OptionsPlay Score: 123

Stop Loss: @ $2.81 Debit. (50% loss of premium paid)

View BIDU 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 Friday’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 BIDU Trade

Buyers stepped in and maintained control all sessions on Thursday after Chairman Powell alleviated concerns about rate hikes. The bond market has shifted its expectations for the first rate hike to November going into the jobs numbers this morning. 10-year yields continue to moderate and provide a tailwind for equities.

Despite this, equities remain below a key 50D SMA, which warrants caution on bullish positions and having some short exposure. Our DailyPlay Portfolio reflects this positioning and we will refrain from adding any new positions at this time. 

DailyPlay Portfolio Review

Investment Rationale

After yesterday’s FOMC meeting, we saw markets give up all intraday gains by the end of the session. We are opening up today higher, as markets seem to shrug off “high for longer” rates. In this environment, our base case remains very cautious as we continue to trade below the 50D SMA on the S&P 500 and will maintain our current positions in the portfolio.

Our Trades

ADBE – 29 DTE

Bullish Credit Spread – ADBE is still holding onto support and a bounce off the level is expected. 

DELL – 50 DTE

Bearish Debit Spread – Dell corrected to the downside yesterday and our bearish thesis on this trade is standing

GM 50 DTE

Bullish Calls – GM pulled back from recent highs and we will therefore monitor this trade to see if it again breaks above $45.

NKE 50 DTE

Bullish Debit Spread – NKE pulled back yesterday. We will keep an eye on this position as support at $88 should be respected.

PDD 50 DTE

Bullish Debit Spread – A break above $130 will confirm our bullish thesis on this trade and indicate that the next target is at around $140.

PLTR 50 DTE

Bearish Debit Spread – We recently opened this position and resistance at $23 still holds.

PYPL 50 DTE

Bullish Debit Spread – PYPL attempted a break above $67 resistance yesterday. We will continue to monitor this position.

PLTR Bearish Opening Trade Signal

Investment Rationale

Investors have grappled with how to value an AI-focused company based on its future revenue potential against its current spend to develop the product. We saw the downside to high Capex spending without a clear path to revenue growth in META. And while PLTR is not a direct parallel, it is a AI-focused company that trades at a very high valuation. These types of valuations continue to be at risk as we grapple with the notion of potentially even higher rates from the Fed.  

Technical Analysis

After gapping higher above $21, PLTR has failed to see any follow through on the initial momentum. Moreover, momentum has now turned negative and testing its $21 level as support alongside a series of lower lows and lower highs. This suggests that we could break below the $21 support and target the $17.70 gap level underneath. 

PLTR – Daily

Fundamental Analysis

Since PLTR barely turns a profit, using EV to Sales is a better valuation to measure PLTR, which trades at over 21x. This is extremely high given that analysts only expect revenue to grow by a modest 13% over the next few years. This puts PLTR in the same valuations as the fastest-growing tech companies with growth numbers that are half as fast. There is a substantial risk that companies with such rich valuations will get cut as interest rates potentially rise even further. 

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 13 June 21st $22/$18 Put Vertical Spreads @ $1.56 Debit per Contract.

Total Risk: This trade has a max risk of $2,028 (13 Contracts x $156) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $156 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is pulling back to lower levels.

1M/6M Trends: Bearish/Neutral

Relative Strength: 9/10

OptionsPlay Score: 113

Stop Loss: @ $0.78 Credit. (50% loss of premium paid)

View PLTR 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 PLTR Trade

DailyPlay Portfolio Review

Investment Rationale

As equity markets stabilize last week after a couple of weeks of pulling back, we find ourselves at a major intersection of buyers and sellers. As we retest the 50D SMA as resistance going into this week, we are closely watching Fed speak and earnings to set the tone for equities. Can markets push back above these levels and continue its rise, or do sellers step back in this week with even heavier volume? We will hold off on adding new positions today to see how the market responds to these levels.

Our Trades

ADBE – 32 DTE

Bullish Credit Spread – ADBE held onto support and started to bounce higher, as expected.  

DELL – 53 DTE

Bearish Debit Spread – Resistance at $130 is still holding and we will therefore keep an eye on this trade over the next few days.

GM 53 DTE

Bullish Calls – GM is aiming higher and a break above $46 resistance will confirm our bullish thesis on this trade.

NKE 53 DTE

Bullish Debit Spread – Support at $90 held up, from where NKE bounced higher, with the target at $100.

PDD 53 DTE

Bullish Debit Spread – The last two trading sessions have seen some strong moves higher and its next target is at around $140.

PYPL 53 DTE

Bullish Debit Spread – A break above $67 resistance would likely close the gap towards $77, with further upside potential.

GM Bullish Opening Trade Signal

Investment Rationale

The future of GM looks exciting with the restart of its autonomous driving unit and its recent price performance. Investors seem to be paying attention to this once-hot EV stock that is on the verge of a big upside breakout. Valuations are also compelling which makes seeking long exposure lower in risk.  

Technical Analysis

After rallying from its $26 lows at the end of last year, GM recently broke out from its multi-year base of $42. It has since retested this level as support and started to trade higher. Additionally, this strength is coupled with outperformance relative to the market, suggesting a potential breakout above its $46 double top, which puts $60 as an extended upside target. 

GM – Daily

Fundamental Analysis

GM trades at less than 5x forward earnings. This is despite analysts expecting 11% EPS growth next year. This represents a 30% discount to its biggest competitor Ford (F). This is despite higher margins and expected top and bottom-like growth relative to Ford. 

Trade Details

Strategy Details

Strategy: Long Call

Direction: Bullish Calls

Details: Buy to Open June 21st $45 Calls @ $2.30 Debit per Contract.

Total Risk: This trade has a max risk of $2,070 (9 Contracts x $230) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $230 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a strong bullish trend.

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 86

Stop Loss: @ $1.15 Credit. (50% loss of premium paid)

View GM 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 GM Trade

DailyPlay Update

On the back of META’s earnings this morning, it is best to take a bit of time for markets to digest the news. On the surface the reaction looks a bit overdone and could potentially offer more buying opportunities, but it’s a bit too early to tell. Let’s stay with our current positions for today and hold off on adding new exposure going into today’s open.