RSP Bullish Opening Trade Signal

View RSP Trade

Strategy Details

Strategy: Long Stock

Direction: Bullish

Details: Buy 14 RSP @ $143 Debit per Share.

Total Risk: This trade has a max risk of $2,001.93 (14 Contracts x $142.99) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $142.99 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is in a bullish trend and is expected to break out higher.

1M/6M Trends: Bullish/Bullish

Technical Score: 5/10

OptionsPlay Score: 125

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

Today’s price action in the markets left a lot to be desired. My biggest concern with our current breakout higher in the S&P above its key $4200 level is the lack of breadth. About 10 stocks are dragging the entire “market” higher while the rest of the market is flat. This type of extreme can only resolve itself in one of two possible ways. Either the AI tech stocks that are dragging the markets higher retrace, which would likely see the S&P 500 retest $3800, or the rest of the market starts to play catchup and the S&P continues this new bullish trend. Despite the economic headwinds, markets can stay irrational longer than you can stay solvent. At the moment, the bulls have more control so I’m going to take this opportunity to add to our position that was established last week, by adding to our RSP position by purchasing another 14 shares (for a hypothetical $100,000 portfolio). This would allow us to potentially profit if the broader market catches up with the AI stocks. 

RSP – Daily

TSLA Bearish Opening Trade Signal

View TSLA Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 2 Contracts Aug 18th $210/$170 Put Vertical Spreads @ $12.88 Debit per contract.

Total Risk: This trade has a max risk of $2,576 (2 Contracts x $1,288) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,288 to select the # shares for your portfolio.

Counter Trend Signal: This stock has rallied into an area of resistance at $215 and is expected to pull back.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 128

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

DailyPlay for June 5th, 2023 is TSLA, which triggered bearish scan after rallying nearly 40% over the past month. The current bullish trend has reached an overbought level coupled with a major resistance level at $215, providing a low risk entry for bearish exposure. TSLA currently has a strong relative strength score of 9 out 10, which is optimal for a bearish counter trend opportunity. 

With declining car sales globally and interest rates back on the rise, TSLA has had to resort to deep price cuts to maintain delivery targets, which impact both top and bottom line. Currently trading at 40x next year’s earnings, TSLA’s valuation is heavily weighted on its 40% EPS growth and 20% gross margins that analysts are expecting. I suspect that is optimistic and there are downside risks to those assumptions. I’m using the rally to this important $215 resistance level as an opportunity to seek a low risk bearish exposure in TSLA. With IV Rank @ 11%, I’m buying the Aug $210/$170 Put Vertical @ $12.88 Debit. 

TSLA – Weekly

Since our Alphabet trade has reached its upper strike price of $125, it’s time to roll our trade Up and Out to the July $125/$135 Call Vertical for a $0.06 Credit. This allows us to extend our upside bet in Alphabet while removing all risk from the table. 

Closing Trade

• UNG – 73.81% Loss: Sell to Close 23 Contracts (or 100% of your remaining Contracts) June 30th $7/$8.50 Call Vertical Spreads @ $0.11 Credit. DailyPlay Portfolio: By Closing the final 23 Contracts, we will receive $253. We partially closed this trade on May 31 @ $0.20 Credit. Our average cost basis to exit this trade is therefore @ $0.15 and our average loss on this trade is 63.33%.

Investment Rationale

We are at a pivotal moment in equities. With the broader market severely lagging behind big tech and the S&P 500 flirting about its key $4200 resistance level, we are positioned for 2 possible outcomes. Either this AI lead tech rally fails to extend further and starts to retrace, we will likely see the S&P 500 back towards the $3800 level. However, if the broader market can rally from here, that will provide the support needed to begin a fresh bullish trend after more than a year of choppy sideways action. Currently, we have positions that would profit from either outcome and will take this opportunity to see where the market closes tomorrow afternoon. At this time, our UNG position has triggered our stop loss level of 50% loss on a debit spread so we are going to close out that position. 

S&P 500 – Daily

Closing Trades

• AAPL – 90.52% Loss: Sell to Close 2 Contracts (or 100% of your remaining Contracts) June 16th $165 Puts @ $0.51 Credit. DailyPlay Portfolio: By Closing the remaining 2 Contracts, we will receive $102. We partially closed this trade on May 22 when we closed 50% of our contracts @ $0.94 Credit. Our average cost basis to exit this trade is, therefore, $0.73 and our average loss on this trade is 86.53%.
• EBAY – 145.76% Loss: Buy to Close 8 Contracts (or 100% of your remaining Contracts) June 2nd $44/$41 Put Vertical Spreads @ $1.45 Debit. DailyPlay Portfolio: By Closing all 8 Contracts, we will be paying $1,160.

WBA Bullish Opening Trade Signal

View WBA Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 12 Contracts July 21st $30/$35Call Vertical Spreads @ $1.58 Debit per contract.

Total Risk: This trade has a max risk of $1,896 (12 Shares x $158) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $158 to select the # shares for your portfolio.

Counter Trend Signal: This stock has respected support and is expected to bounce higher from this point.

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 93

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 Wednesday’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 S&P 500 continues to flirt with the $4200 major resistance level. This week has been filled with positive news, debt ceiling, a possible pause to rate hikes, yet markets remain below $4200. At the moment, market breadth remains poor with AI stocks dragging it higher. For the market to break higher, the rest of the market needs to start pulling its weight. At this juncture, we are taking an opportunity to close out existing trades and waiting to see if bulls have enough control to breakout higher. Walgreens (WBA) recently made a new 52-week low with positive divergence on the Weekly Chart with a +13 setup. This sets up for a potential quick bounce higher on a counter trade and I’m looking to buy the July $30/$35 Call Vertical @ $1.58 Debit or about 5% of the stock’s value. 

WBA – Daily

We are also taking this opportunity to close out our remaining AAPL Calls and EBAY positions. 

Partial Closing Trades

• OIH – 23.86% Loss: Buy to Close 1 Contract (or 1/3 of your Contracts) June 16th $265/$255 Put Vertical Spreads @ $5.45 Debit. DailyPlay Portfolio: By Closing 1 of the 3 Contracts, we will pay $545.
• UNG – 52.38% Loss: Sell to Close 22 Contracts (or 50% of your Contracts) June 30th $7/$8.50 Call Vertical Spreads @ $0.20 Credit. DailyPlay Portfolio: By Closing 22 of the 45 Contracts, we will receive $440.
• CAH – 64.29% Gain: Sell to Close 5 Contracts (or 50% of your Contracts) July 21st $82.50 Puts @ $3.45 Credit. DailyPlay Portfolio: By Closing 5 of the 10 Contracts, we will receive $1,725.

Investment Rationale

The broad market was flat yesterday, but tech continued to plow ahead with the QQQ adding another 45 bps. of performance. Interestingly, though, NVDA gapped well higher but closed beneath its open after running as high as $420. (I actually see daily and weekly +13 signals in it and looking more in-depth into the name after briefly talking about it in yesterday’s weekly Technical Outlook, the $417 level was an upside target that’s been in place on the monthly chart since the late-2018 decline pulled the stock down to $31. (So, no, I’m not buying it up here.)

Today is the last day of the month, so look for the first few days of June to potentially continue having some cyclical sectors seeing money taken out of them in favor of mega-cap tech. To me, some of those tech high-flyers could easily stall around current prices, but hell hath no fury like a scorned “missed the up move” investor who will now blindly buy the AI-related names, thinking they have an edge in doing so.

Looking at our portfolio, let’s lower some of the bullish bets in the energy space that haven’t worked yet. So, let’s take off 1 of 3 OIH short put spreads, and let’s reduce 22 of 45 UNG long call spreads. Both could be affected by the oil and Natgas inventory-related weekly data out on Thursday morning this week. (Usually, the oil inventory report comes out Wednesday mornings, but because of the Memorial Day holiday, it gets delayed this week until 11:00 am ET on Thursday – 30 minutes after the Natgas number is released.)

We are also long 10 CAH $82.5 puts, and with them up 64%, let’s take half off today to lock in some much-needed profit after a tough month of several losses.

CAH – Daily

RSP Bullish Opening Trade Signal

View RSP Trade

Strategy Details

Strategy: Long Stock

Direction: Bearish

Details: Buy 14 RSP @ $141.33 Debit per Share.

Total Risk: This trade has a max risk of $1,978.62 (14 Shares x $141.33) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $141.33 to select the # shares for your portfolio.

Counter Trend Signal: This stock has respected support and is expected to continue higher.

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 109

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 major stock indexes moved higher again on Friday, though don’t be fooled by those headlines: The equal-weighted SPX (RSP) closed on its third lowest Friday close of the year. There is no particular “market” this year, but several different ones.

RSP – Weekly

Frankly, when I look at the above chart, my eyes see a new small risk long play with a far greater potential upside to reach the downtrend line then I need to risk to a new 2023 Friday closing low (beneath $138.03 from mid-March).

However, selling a $141/$138 put spread yields just 30% of the strike differential – a definite “no go” in my book. A July 21st $141/$151 call spread costs 43% of the strike differential – also a “not a chance I’m going to lay that out”. So once again, the obvious bullish option trades make no sense to put on. So, my suggestion: simply buy the ETF shares in an appropriate dollar amount you are willing to risk for a share-holding position. On a theoretical $100K account, I’d risk no more than 3-5% on an un-leveraged idea like this, but stick with what you are comfortable with. Your sell-stop is that aforementioned Friday close beneath $138.03.

CAH Bearish Opening Trade Signal

View CAH Trade

Strategy Details

Strategy: Long Put

Direction: Bearish

Details: Buy to Open 10 Contracts July 21st $82.50 Puts @ $2.10 Debit per contract.

Total Risk: This trade has a max risk of $2,100 (10 Contracts x $210) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $210 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is in a bullish trend, but expected to trade lower over the duration of this trade, as it has reached a point of exhaustion.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 65

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

Market breadth has been poor with tech dragging the market cap-weighted indices higher in an “AI lead” rally. One sector that has lagged is healthcare and continues to underperform the market. Cardinal Health (CAH) on paper looks like a strong out-performer in the healthcare space, printing a new 52-week high last week. However on closer inspection as it broke out above its $80 resistance level to 2016 highs, it saw negative divergence with a +9 setup on the Weekly Chart. Couple this with a fundamental picture that looks far from attractive; CAH has seen no EPS growth since 2016 despite growing revenues from $130b to $180b last FY. What I see is a company that has rallied to a prior high from 2016 that has underperformed relative to its sector by 50% since 2016 with classic signs of exhaustion. My hunch is that this breakout and rally will fade and reverse lower. With very low implied volatilities in CAH options, I think its worth considering bearish exposure with a simple outright put option. I’m looking at the July $82.5 Puts @ $2.10 Debit, risking only 2.5% of the stock’s value to gain unlimited downside exposure if CAH were to reverse lower. 

CAH – Daily

Partial Closing Trade

• GOOGL – 42.54% Gain: Sell to Close 1 Contract (or 50% of your remaining Contracts) June 16th $112/$122.50 Call Vertical Spreads @ $5.83 Credit. DailyPlay Portfolio: By Closing 1 of the remaining 2 Contracts, we will receive $583.

UNG Bullish Opening Trade Signal

View UNG Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 45 Contracts June 30th $7/$8.50 Call Vertical Spreads @ $0.43 Debit per contract.

Total Risk: This trade has a max risk of $1,935 (45 Contracts x $43) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $43 to select the # contracts for your portfolio.

Trend Continuation Signal: This stock has recently turned bullish and is expected to continue higher.

1M/6M Trends: Bullish/Neutral

Technical Score: 1/10

OptionsPlay Score: 112

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 Wednesday’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 disparate thoughts of the Democrats and Republicans to resolve the debt-ceiling issue continues to be front and center for investors, as stocks again fell as the clock continues ticking down to the June 1 deadline that Treasury Secretary Yellen believes will be the day that the US government runs out of money to pay its debts. All three major stock indexes were well lower on the session, and the SPX has already given back some 100 points from the May high from just days ago. (You can thank your politicians on both sides of the aisle for that.) Given my writing this Wednesday evening, NVDA’s surge after reporting earnings after yesterday’s bell, I’d venture a decent guess that stocks open higher today – especially in tech, which has been killing it recently on the demand for AI-related names.

As a reminder, yesterday’s OIH close was above the downtrend line level I had given to you on Tuesday as a conditional trade to get into on either Tuesday or Wednesday if above the respective breakout price. Late yesterday the requirement was met, so on the close we got into our short June 16th $265/$255 put spread recommendation at ~$3.40 – the closing bid/offer mid-price.

OIH – Daily

For a new idea, I’m going to stay in the energy space, and look to play for an impending short squeeze higher in natural gas. We’ll use the UNG ETF as our proxy. Note that after the daily -13 low, we saw a counter move higher that topped on a Setup +9 count a week ago. The pullback has pulled back but held above the bearish Propulsion Momentum level at $6.74, while it also broke out above the downtrend line.  s such, look to buy a UNG June 30th $7/$8.5 call spread (it closed yesterday at $0.425, or 28% of the strike differential).

UNG – Daily

Do note that today at 10:30am ET is the weekly natural gas inventory report – a number that can easily move natgas in either direction based upon where it comes in vs. expectation. Depending upon how you like to manage risk, you could put the whole trade on before the number; some before and some after; or completely wait for the number to come out to make sure it’s not a bearish one. The latter may be the safest way, to play but a bullish number is going to move natgas up quickly and then the call spread will cost far more. (Only you can decide which is the best choice for you.)

We are long 17 CSX $31/$29 put spreads that expire tomorrow, and yesterday saw the stock close at $30.89. With time virtually gone and the stock having sold down to a prior downtrend line it broke out from, let’s take 9 of those off today and then the final 8 tomorrow.

CSX – Weekly

Lastly, we are still long 2 GOOGL call spreads, having sold the third one out a few days ago right by the high of the move. Let’s use today’s strength in tech stocks to take one more off (and preferably when the stock is in the $122.50 to $123.50 area).

GOOGL – Weekly

Investment Rationale

Stocks took it on the chin on Tuesday, as concerns grew that the debt-ceiling limit is closing in and there’s still no resolution. The clock is ticking and investors are running out of patience – let alone respect – for our elected officials who continually politicize every issue they’re asked to vote on. It’s very disheartening.

I’ve said it before and I’ll say it again: committing substantial new capital to the markets now – ahead of the debt-ceiling deadline and upcoming early-June FOMC rate announcement – all while rates are moving higher – is, frankly, an exercise in futility. Day-to-day headlines will sway traders in either direction, and they will come fast and furiously till the June 1 deadline and then again from the Fed on June 3rd.

No new trades today as we get FOMC minutes at 2pm ET. And as a note, yesterday we saw the OIH close at $265.65 – about a half dollar under where it would break out above the downtrend line and get us into a bullish trade. Thus, we did not enter selling the DP put spread on Tuesday, but could today IF we see a close above $265.20 that is also preferably, an up close (the more above, the cleaner the potential breakout).

OIH – Daily

OIH Conditional Bullish Opening Trade Signal

View OIH Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts June 16th $265/$255 Put Vertical Spreads @ a current cost basis of $3.80 Credit per contract.

Total Risk: Based on the current cost basis this trade has a max risk of $1,860 (3 Contracts x $620) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $620 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is neutral to bearish and expected to break out above resistance levels.

1M/6M Trends: Neutral/Bearish

Technical Score: 3/10

OptionsPlay Score: 87

Condition: Open this trade when OIH closes above $267.07 today or above $266.14 tomorrow.

Investment Rationale

A pretty quiet day in the market on Monday saw the Dow fall 42 bps., but rallies in the SPX and NDX. Apple caught a downgrade from Loop Capital, and the biggest of all US companies by market cap fell 55 bps. after last week marking the highest high since April ’22. It’s not the craziest place for a downgrade, based upon its historical chart (below), as the analyst there is looking for AAPL to miss their next earnings estimate.

AAPL – Weekly

Investors await the FOMC meeting minutes on Wednesday afternoon, and of course, more news on the debt-ceiling negotiations. (Listen to my thoughts on them in the replay video of Monday’s weekly market outlook webinar.)

I have dramatically trimmed down our portfolio holdings, with the recent gains forcing us out of prior bearish bets. One good play we do have on is in GOOGL. With price getting very close to where the weekly cloud’s Lagging Line would hit resistance against the top of its respective cloud (at $126.71), let’s trim 1 of 3 remaining call spreads today, up 83% on it.

GOOGL – Weekly

Our EBAY short $44/$41 put spread trade may just work out after all. Our play expires a week from this Friday, and here’s what the current chart looks like:

EBAY – Daily

For a new trading idea, let’s look at the Oil Services Index ETF (OIH). It has already broken above one downtrend line, and is on the cusp of breaking out above the higher of the two ones on a close today above $267.07 or above $266.14 tomorrow. If either of those happen, let’s sell the June 16th $265/$255 put spread at then bid/offer mid-price. As of last night, that closed at $3.80, or 38% of the strike differential. (By the way, to show you just how overpriced calls are, the same dated $265/$285 call spread costs the identical 38% as the $10-wide put spread we will potentially enter today for a 38% credit.  This is another example of calls costing just too much these days.)