DEO Bullish Opening Trade Signal

Investment Rationale

Alcohol sales have been under pressure for a few years and Diageo’s stock has underperformed with it. However, the world’s largest alcohol company has started to see a turnaround and has the potential to start a longer-term bullish uptrend. 

Technical Analysis

Having shed about a third of its value from its peak in 2021, DEO has started to signs of bottoming around the $137 area. It has closed above its major $147 resistance level and continues to form higher lows and targets $160 where it will fill its gap. 

DEO – Daily

Fundamental Analysis

While expecting about 11% EPS growth, DEO only trades at 16x forward earnings, making it significantly undervalued relative to the market and its peers. It also generates a large amount of free cash flow and has a strong history of returning cash back to investors in the form of dividends. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 4 Contracts April 19th $145/$155 Call Vertical Spreads @ $4.72 Debit.

Total Risk: This trade has a max risk of $1,888 (4 Contracts x $472) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $472 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is neutral and in a larger bullish trend.

1M/6M Trends: Neutral/Neutral

Relative Strength: 3/10

OptionsPlay Score: 96

Stop Loss: @ $2.36 Credit. (50% loss of the premium)

View DEO 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 DEO Trade

Closing Trade

• GE – 112.46% Loss: Buy to Close 4 Contracts (or 100% of your Contracts) March 28th $149/$157.50 Call Vertical Spreads @ $6.65 Debit. DailyPlay Portfolio: By Closing all 4 Contracts, we will be paying $2,660. We initially opened these 4 Contracts on Feb 21 @ $3.13 Credit. Our average loss, therefore, is $352 per contract. 

DailyPlay Portfolio Review

Our Trades

AAPL

Bullish Debit Spread. We entered this position yesterday on the back of a recent selloff and favorable risk/reward. If the outlook on China improves, expect to see AAPL shares recover from this selloff.  

C

Bullish Calls. Citigroup continues to rally on the back of Chairman Powell’s testimony on rolling back proposed capital requirement changes for banks. Looking for a breakout above $57 to continue. 

GE

Bearish Credit Spread. Triggered our stop loss and we are closing out this trade, momentum simply was too strong to fade the strength. 

GOOGL

Bullish Debit Spread. Just at our stop loss level, will monitor this position for a potential opportunity to close out over the next couple of trading sessions. 

META

Bearish Debit Spread. We just entered this trade to fade the strength in META currently near breakeven and will monitor this position. 

AAPL Bullish Opening Trade Signal

Investment Rationale

AAPL’s recent selloff provides a rare opportunity for investors to add long exposure with a favorable risk/reward ratio. We rarely see AAPL underperform the markets but the past few months have seen AAPL decline as a result of poor China sales. The recent stock price reflects this outlook, but the long-term prospects of AAPL remain both diverse and strong

Technical Analysis

AAPL has been trading in a range between $170 and $197, yesterday it sold off to the bottom end of this range and the risk/reward is now the most favorable for adding long exposure. RSI also dipped to the low 20’s, a level we have not seen since the beginning of 2019, which was followed by a 50% rally in the stock. Since META broke out above its $400 all-time high on its blowout earnings and dividend announcement, META has continued to grind higher, but momentum has slowed considerably and showing signs of exhaustion. This increases the risk of a pullback or at the very least a consolidation as it touches $500. 

AAPL – Daily

Fundamental Analysis

AAPL remains on the more expensive side of 26x forward earnings, and EPS growth has been recently revised up to 11% on the back of strong Mac sales and gains in the subscriptions business. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 6 Contracts April 5th $170/$180 Call Vertical Spreads @ $3.64 Debit.

Total Risk: This trade has a max risk of $2,184 (6 Contracts x $364) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $364 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that pulled back and is expected to continue higher.

1M/6M Trends: Bearish/Bearish

Relative Strength: 2/10

OptionsPlay Score: 104

Stop Loss: @ $1.82 Credit. (50% loss of the premium)

View AAPL 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 AAPL Trade

META Bearish Opening Trade Signal

Investment Rationale

The recent AI lead rally has many investors whispering the “B” word, “bubble”. But is it time to fade this move, or will you just get run over by the bulls? The parallels between the current rally and the dot com boom are there, but it’s vastly different this time. The companies that are leading with sky-high valuations are generating substantial profits, far from the shell companies of the 90’s. However, that doesn’t mean the market hasn’t started to overpay for these companies. Looking at META, which now trades at 25x forward earnings, is starting to look quite expensive and stretched. 

Technical Analysis

Since META broke out above its $400 all-time highs on its blowout earnings and dividend announcement, META has continued to grind higher, but momentum has slowed considerably and showing signs of exhaustion. This increases the risk of a pullback or at the very least a consolidation as it touches $500. 

META – Weekly

Fundamental Analysis

META currently trades at its upper bound of its historical valuation at 25x forward earnings over the past decade, about 20% more expensive than the beginning of the year. Trading at these multiples, investors need to see substantial earnings growth to recoup their investments, yet analysts are already expecting EPS declines starting next quarter. This presents a fairly substantial risk of nearly 20% downside from a valuation standpoint. 

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 4 Contracts March 28th $495/$480 Put Vertical Spreads @ $5.57 Debit.

Total Risk: This trade has a max risk of $2,228 (4 Contract x $557) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $557 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is extremely overbought and expected to pull back. 

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 107

Stop Loss: @ $2.78 Credit. (50% loss of the premium)

View META 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 META Trade

Closing Trade

• SPY – 28.39% Loss:  Sell to Close 5 Contracts (or 100% of your Contracts) April 30th $490 Puts @ $2.75 Credit per contract. DailyPlay Portfolio: By selling all 5 Contracts, we will receive $1,375. We initially opened these 5 Contracts on Feb 27 @ $4.01 Debit. Our average loss, therefore, is $126 per Contract. 

Investment Rationale

Last week’s economic and corporate earnings reports solidified how investors view the trajectory of our 2024 outlook. Corporate earnings have continued to surprise to the upside and the Fed looks ready to make cuts in the middle of the year. This seems to be enough for investors to continue to push equities higher.

As the equity rally starts to broaden out, there is a growing thesis that despite the overbought conditions and stretched valuations, that this rally still has significant upside potential. Our SPY hedge was meant to protect us against a surprise inflation print and now that the uncertainty has been removed, we also should remove our SPY hedge for a small loss of around 0.5% of our portfolio value, well worth the cost.

GOOG Bullish Opening Trade Signal

Investment Rationale

It’s been hard to ignore the AI theme over the past year where AI-related stocks have seemingly riding a one-way rocket ship. Most stocks that have AI exposure are currently trading at relatively rich valuations and near all-time highs. But GOOGL has a high amount of exposure to the AI theme yet still trades at a reasonable valuation. With its recent selloff, the current risk/reward looks favorable to add some bullish exposure as an AI theme for your portfolio.

Technical Analysis

GOOGL recently broke out above its $140 trading range in mid-January to a new all-time high and recently sold off back towards the $138-140 level as support. I believe that the risk/reward to add long exposure here is favorable with an initial target of $151.50 gap fill level. 

GOOGL – Daily

Fundamental Analysis

GOOGL trades at a very reasonable 20x forward earnings despite analysts expecting nearly 16% EPS growth and a fairly strong potential to accelerate revenues with its investments in AI. Essentially we can purchase GOOGL for the same multiple as the S&P 500 average, while expecting nearly triple the EPS growth rate. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 3 Contracts April 5th $135/$150 Call Vertical Spreads @ $6.07 Debit.

Total Risk: This trade has a max risk of $1,821 (3 Contract x $607) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $607 to select the # contracts for your portfolio.

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

1M/6M Trends: Bearish/Neutral

Relative Strength: 4/10

OptionsPlay Score: 97

Stop Loss: @ $3.04 Credit. (50% loss of the premium)

View GOOGL 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 GOOGL Trade

DailyPlay Portfolio Review

Investment Rationale

As we head into this morning’s PCE inflation print, we are going to hold off on add any further positions until the markets have digested the Fed’s preferred inflation number. We currently have a short GE position that we are monitoring and a SPY put that we put on yesterday as a hedge against volatility over the next couple of months.

Our Trades

C

Bullish Calls. With $55 as support, we expect to see a bounce higher, aiming at $58.

GE

Bearish Credit Spread. GE continues to be extremely overbought and we expect to see a pullback to lower levels within the next few trading days.

SPY

Bearish Puts. We opened this position to hedge our long positions in our Portfolio. A break below $500 would place this trade in a favorable position.

Closing Trades

• ORCL – 25.90% Loss: Sell to Close 4 Contracts (or 100% of your Contracts) March 15th $110/$120 Call Vertical Spreads @ $3.72 Credit per contract. DailyPlay Portfolio: By selling all 4 Contracts, we will receive $1,488. We initially opened these 4 Contracts on Jan 24 @ $5.02 Debit. Our average loss, therefore, is $130 per Contract. 
• NOC – 38.78% Gain: Sell to Close 6 Contracts (or 100% of your Contracts) March 22nd $450/$475 Call Vertical Spreads @ $12.62 Credit per contract. DailyPlay Portfolio: By selling all 6 Contracts, we will receive $7,572. We initially opened 3 Contracts on Feb 5 @ $7.67 Debit, 2 Contracts on Feb 8 @ $10.45 Debit, and another 1 Contract on Feb 23 @ $10.50 Debit. Our average gain, therefore, is $355 per Contract. 

Investment Rationale

As equity valuations continue to stretch and market internals show a deterioration of market breadth, we added a portfolio protection put on the DailyPlay portfolio yesterday. I now believe that it is time to reduce some of our bullish exposure in the markets by locking in gains on profitable trades and closing out small losers at this time. The metrics are starting to skew against our directional view in NOC and ORCL. 

ORCL – Oracle is approaching expiration and we discussed closing out this trade during our Monday Morning outlook session and now is a good time to do so. 

NOC – The momentum on NOC is slowing down with only 24 days to expiration, this is one that I believe we should take profits on and potentially reenter at a better price in the future as I still believe in the longer-term thesis of this trade. 

SPY Portfolio Hedge Signal

Investment Rationale

I hope that many of you caught the Open Mike LiveStream yesterday afternoon with Michael Khouw, as he discussed hedging a long portfolio with options in the current market environment. With the VIX below 14% and the SPX within a few points of the all-time highs, it might be prudent to have some protection on a long portfolio such as our DailyPlay portfolio going into this week’s PCE Inflation numbers. Let’s look at buying an Out of the Money April 30 $490 Put to offer downside protection on our portfolio through the April expiration in the event of a violent selloff. The Open Mike LiveStream will be every week on Monday and Wednesday @ 4:15PM EST and we hope that you’re enjoying it. 

SPY – Daily

Trade Details

Strategy Details

Strategy: Long Puts

Direction: Bearish Puts

Details: Buy to Open 5 Contracts April 30th $490 Puts @ 4.01 Debit.

Total Risk: This trade has a max risk of $2,005 (5 Contract x $401) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $401 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is bullish but expected to pull back from recent highs.

1M/6M Trends: Bullish/Bullish

Relative Strength: 8/10

OptionsPlay Score: 22

Stop Loss: @ $2.00 Credit. (50% loss of the premium)

View SPY 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 SPY Trade

Closing Trade

• BA – 47.53% Loss: Sell to Close 2 Contracts (or 100% of your Contracts) April 19th $210/$235 Call Vertical Spreads @ $4.67 Credit per contract. DailyPlay Portfolio: By selling both Contracts, we will receive $934. We initially opened these 2 Contracts on Feb 2 @ $8.90 Debit. Our average loss on these shares is $423 per Contract. 

Investment Rationale

Boeing was absent this weekend’s airshow in Singapore and China’s COMAC stole the limelight and aspires to break the duopoly. This has put further pressure on BA’s stock price over the weekend and potentially pushes it below our key $200 support. We are going to cut our losses and keep the small and focus on adding to our positions that are working out such as NOC and C.