GE Bearish Opening Trade Signal

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Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish Credit Spread

Details: Sell to Open 6 Contracts Feb 16th $130/$135 Call Vertical Spreads @ $1.89 Credit per contract.

Total Risk: This trade has a max risk of $1,866 (6 Contracts x $311) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $311 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is currently bullish but at an overbought condition.

1M/6M Trends: Bullish/Bullish

Relative Strength: 9/10

OptionsPlay Score: 103

Stop Loss: @ $3.78 Debit. (100% loss to the value of premium received)

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. 

Investment Rationale

The first trading day of 2024 looks like it may start off on a negative note with futures trading lower this morning. This comes after a very strong end to 2023 that saw equities rally significantly across the board. Market structure remains bullish, but the extended equity rally is at risk of a short-term retracement lower. Interest rates continue to act as the main theme, with investors now pricing in three rate cuts in 2024, however, this is still largely dependent on inflation and jobs/employment data with Nonfarm payrolls set to be released this Friday. 

Our bearish DailyPlay for today is General Electric (GE). GE has shown negative divergence with momentum indicators making lower lows while price continues to make higher highs – a strong bearish signal. While price structure is bullish, the daily timeframe indicates that the current rally is over-extended which provides an opportunity to fade GE and take advantage of the higher probability of a retracement lower. From a fundamental perspective, GE’s price/forward earnings ratio currently sits at 53.76, significantly higher than where the price/forward earnings ratio was between 16 and 27 over the last 5 years. 

We will look to Sell the Feb 16th $130/$135 Call Vertical @ $1.89 Credit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 6 Contracts for a risk of $1,866. We will set a stop loss on the put spread at around 100% loss to the value of the premium received @ $3.78 Debit. 

GE – Daily

As the trading year shifts to a close, equities experienced some consolidation in recent weeks slowing down the momentum from early December. However, the risk-on sentiment remains strong in markets as the pricing in of a dovish Fed, and potentially up to 3 interest rate cuts in 2024, continues to provide a tailwind. Fed futures indicate that rates will hold steady for the next Fed meeting on January 31st. The first 25 point rate cut, based on Fed futures, looks set to go ahead in the March Fed meeting with a 73% probability of this occurring. Once again, it is almost time for another earnings season with Q4 earnings kicking off in the 2nd week of January lead by the banking giants. Analysts are expecting a 2.4% earnings growth rate for companies in the S&P. 

Our DailyPlay portfolio weighs more to the bullish side with six bullish positions and one bearish position. This largely reflects our sentiment heading into 2024. We will continue to monitor for new positions and opportunities to close out existing positions once they reach our TP/SL thresholds. 

DXCM Bullish Opening Trade Signal

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Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts Feb 16th $120/$110 Put Vertical Spreads @ $3.30 Credit per contract.

Total Risk: This trade has a max risk of $2,010 (3 Contracts x $670) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $670 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is currently bullish but has recently pulled back to provide an entry.

1M/6M Trends: Bullish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 90

Stop Loss: @ $6.60 Debit. (100% loss to the value of premium received)

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. 

Investment Rationale

The week before the new year tends to be quiet as there is a lack of fundamental catalysts to provide volatility. However, we have seen equities moving higher after a short-term pullback with the S&P just shy of all-time highs and the Nasdaq-100 now trading at all-time highs. With yields continuing to decline, equities continue to take advantage of the tailwind in the current risk-on environment. This provides bullish opportunities heading into the new year as momentum remains strong. 

We will look to Sell the Feb 16th $120/$110 Put Vertical @ $3.30 Credit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 3 Contracts for a risk of $2,010. We will set a stop loss on the put spread at around 100% loss to the value of the premium received @ $6.60 Debit. 

DXCM – Daily

Closing Trade

• ALL – 49.06% Gain: Buy to Close 6 Contracts (or 100% of your Contracts) Jan 19th $140/$145 Call Vertical Spreads @ $1.08 Debit. DailyPlay Portfolio: By Closing all 6 Contracts, we will be paying $648. We initially opened these 6 Contracts on Dec 5 @ $2.12 Credit. Our average gain, therefore, is $108 per contract. 

Investment Rationale

The major indices experienced a minor pullback from all-time high territory this week but price action still remains bullish as markets continue to price in a more dovish than expected Fed from last week’s meeting indicating that there would be 3 interest rate cuts instead of 2. While this does bode well for equities, we see signs of concern regarding 2024 consumer demand as Nike has cut their annual revenue forecast. 

Closing Trade

• PLTR – 59.40% Loss: Buy to Close 12 Contracts (or 100% of your Contracts) Jan 19th $20/$17 Put Vertical Spreads @ $2.12 Debit. DailyPlay Portfolio: By Closing all 12 Contracts, we will be paying $2,544. We initially opened these 12 Contracts on Nov 28 @ $1.33 Credit. Our average loss, therefore, is $79 per contract. 

Investment Rationale

With the S&P500 and Nasdaq-100 pulling back from recent highs, PLTR has also pulled back thereby canceling our bullish thesis on this trade. PLTR broke below support at $18 on the back of the larger pullback. We will therefore close this position at 59.40% loss.

Closing Trade

ROKU – 53.16% Loss: Buy to Close 3 Contracts (or 100% of your Contracts) Jan 26th $106/$93 Put Vertical Spreads @ $8.47 Debit. DailyPlay Portfolio: By Closing all 3 Contracts, we will be paying $2,541. We initially opened these 3 Contracts on Dec 11 @ $5.53 Credit. Our average loss, therefore, is $294 per contract. 

Investment Rationale

Equities continue to rally now flirting with all time high territory for both the S&P and Nasdaq-100 as we approach the end of the year. With a dovish Fed, sentiment is bullish heading into 2024 as 3 interest rate cuts are now expected instead of the 2 cuts that markets were pricing in over recent weeks. Futures move lower this morning as FedEx cuts their annual revenue forecast. We will monitor any pullbacks for additional buying opportunities.

ROKU broke below the $100 level and invalidated our bullish thesis on the stock. Therefore, we will be closing this position for a 53% loss. 

ZM Bearish Opening Trade Signal

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Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Jan 26th $72/$77 Call Vertical Spreads @ $1.63 Credit per contract.

Total Risk: This trade has a max risk of $2,022 (6 Contracts x $337) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $337 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is currently bullish but trading at resistance..

1M/6M Trends: Bullish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 94

Stop Loss: @ $3.26 Debit. (100% loss to the value of premium received)

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. 

Investment Rationale

As equities continue to rally into overbought territory, we look to balance our DailyPlay portfolio with a bearish position. As such, we are looking into Zoom Video Communications (ZM). ZM is underperforming relative to the market and has reached a multi-month area of resistance at $74, as recently, its price action has shown multiple rejections of that level. Price has therefore been rangebound since March, indicating that a pullback is likely. Risk/reward favors the downside, so we will use this opportunity to collect a premium by playing a bearish Credit Spread.

We will look to Sell the Jan 26th $72/$77 Call Vertical @ $1.63 Credit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 6 Contracts for a risk of $2,022. We will set a stop loss on the put spread at around 100% loss to the value of the premium received @ $3.26 Debit. 

ZM – Daily

ORCL Bullish Opening Trade Signal

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Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 7 Contracts Feb 16th $105/$120 Call Vertical Spreads @ $2.94 Debit per contract.

Total Risk: This trade has a max risk of $2,058 (7 Contracts x $294) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $294 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is expected to bounce higher off support.

1M/6M Trends: Bearish/Bearish

Relative Strength: 2/10

OptionsPlay Score: 96

Stop Loss: @ $1.47 Credit. (50% loss on premium paid)

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. 

Investment Rationale

As we approach the end of 2023, equities have experienced a Santa Claus rally largely driven by a dovish Fed. Last week’s Fed meeting confirmed the Fed’s dovish stance and indicated that there could be 3 x 0.25% point cuts in store for 2024 as opposed to the 2 that was originally anticipated. Naturally, equities bounced higher on this news with the S&P and Nasdaq a stone throw away from all-time highs. We are also seeing a strong rotation back into tech stocks after a short-term retracement. Before things quiet down next week, there are still some key data releases – GDP (Thursday) and PCE price index figures (Friday).   

ORCL gapped down after earnings on December 11th, although earning was as expected. It then found support at $100 to form a double bottom at this point. Currently, ORCL is showing bullish price action and we therefore believe that it will bounce higher over the duration of this trade. The next resistance is at $115 and then $125.

We will look to Buy the Feb 16th $105/$120 Call Vertical @ $2.94 Debit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 7 Contracts for a risk of $2,058. We will set a stop loss on the put spread at around 50% loss of the premium paid @ $1.47 Credit.

ORCL – Daily

Closing Trade

• TLT – 66.94% Gain: Buy to Close 11 Contracts (or 100% of your Contracts) Jan 19th $95/$92 Put Vertical Spreads @ $0.41 Debit. DailyPlay Portfolio: By Closing all 11 Contracts, we will be paying $451. We initially opened these 11 Contracts on Dec 13 @ $1.24 Credit. Our average gain, therefore, is $83 per contract. 

JNJ Bullish Opening Trade Signal

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Strategy Details

Strategy: Long Call

Direction: Bullish

Details: Buy to Open 3 Contracts Feb 16th $155 Calls @ $6.15 Debit per contract.

Total Risk: This trade has a max risk of $1,845 (3 Contracts x $615) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $615 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is expected to continue higher.

1M/6M Trends: Bullish/Neutral

Relative Strength: 4/10

OptionsPlay Score: 88

Stop Loss: @ $3.08 Credit. 50% loss on premium paid)

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. 

Investment Rationale

As we end the week, we will be closing our TLT position that was opened a few days ago after the price has rallied significantly after the Fed meeting. TLT has now closed in on our price target of $100 and while we maintain our bullish thesis, we will be waiting for any pullbacks for additional long entries. 

Our bullish DailyPlay today is Johnson & Johnson ($JNJ). Price is showing signs of capitulation as momentum swings positive. Additionally, JNJ has experienced a pullback to the low $150s and has found support which provides an excellent risk/reward long position. We will be targeting the Feb monthly contract and the trade structure is a long call as we expect a sharp bullish move. This allows for plenty of upside as the next resistance level sits at the $170 area. 

We will look to Buy the Feb 16th $155 Call @ $6.15 Debit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 3 Contracts for a risk of $1,845. We will set a stop loss on the spread at around 50% loss of the premium paid @ $3.08 Credit.

JNJ – Daily

Closing Trade

• KRE – 91.43% Loss: Buy to Close 10 Contracts (or 100% of your Contracts) Jan 19th $48/$51 Call Vertical Spreads @ $2.01 Debit. DailyPlay Portfolio: By Closing all 10 Contracts, we will be paying $2,010. We initially opened these 10 Contracts on Dec 7 @  $1.11 Credit. Our average loss, therefore, is $90 per contract. 

Investment Rationale

With positive news coming from the Federal Reserve Bank yesterday, KRE broke above resistance at $49 – $50. The Fed indicated that rate cuts are on the table for next year, which caused equities to rally. We will therefore cut our loss on KRE and continue to monitor the market for further opportunities in the direction of the overall market trend.