GLD Conditional Bullish Opening Trade

View GLD Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 5 Contracts Dec. 16th $160/$155 Put Vertical Spreads @ $0.74 Credit.

Total Risk: This trade has a max risk of $2,130 (5 Contracts x $426).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Mildly Bullish

Technical Score: 6/10

OptionsPlay Score: 107

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF GLD sells down to $161.50 to $160. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

Investment Rationale

Stocks were holding recent gains through much of yesterday’s trading, but a late sell-off fueled by Amazon announcing layoffs sent the SPX down some 36 points, virtually on the low of the session. But after the close, the Berkshire Hathaway newest holdings file was released, showing a $4B investment in Taiwan Semiconductor amongst others, helping push futures higher to get back about 1/3 of what they lost yesterday (as of Monday night as I write this).

Running multiple scans yesterday that I do to come up with potential new Daily Play trade ideas yielded no help, as the price is beneath levels I really want to sell at, and are higher than support levels. Thus, we will be patient and look for opportunities that may present themselves to us if they appear at our preferred price. 

One such idea is to look for a pullback in gold (via the GLD ETF). Yesterday, we saw the cloud’s Lagging Line close right on the top of its cloud, perhaps giving an indication that it can pull back after the $100+ rally that spot gold has made in the past week. Looking at where the daily cloud top shows up for the current price (just north of $160), along with the volume distribution over the last month (shown with horizontal bars on the right side of the chart), should we see the GLD sell down to $161.50 to $160, we’ll sell the Dec. 16th $160/$155 put spread for the then bid/offer mid-price, looking for gold to bottom there and turn back higher. THIS IS A CONDITIONAL TRADE DEPENDING UPON UPCOMING PRICE ACTION AND MAY NOT BE EXECUTED.

GLD – Daily

Partial Closing trade

• VALE -115.63% Gain: Sell to Close 10 Contracts Dec. 2nd $13.50/$15.50 Call Vertical Spreads @ $0.64 Credit. DailyPlay Portfolio: By Closing 10 of the original 20 Contracts, we will be receiving $640. 

IEF Conditional Bullish Opening Trade

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Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 12 Contracts Dec. 16th $95/$93 Put Vertical Spreads @ $0.47 Credit.

Total Risk: This trade has a max risk of $1,836 (12 Contracts x $153).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Neutral

Technical Score: 3/10

OptionsPlay Score: 86

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF the TNX rallies to the 3.97% to 4.01% range anytime this week. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

Investment Rationale

UST 10-yr. rates will adjust today to include what would have been Friday’s move, given the fixed income market was closed then for Veteran’s Day. Last week’s large downdraft in yields did break key support at 3.94%, but they also stopped at one (3.80%) of two downside targets I highlight in today’s weekly webinar.

Since they are trading very technically, let’s look to take advantage of a potential rate rise sometime this week back to ~4%, where I note first level resistance now lies. So, as a conditional trade, let’s look to sell an IEF (that’s the ETF that most closely inversely tracks the TNX’s direction) Dec.16th $95/$93 put spread when/if the TNX rallies to the 3.97% to 4.01% range (anytime this week) at what is then its mid bid/offer spread price. Bond bulls should be supporting the ETF in that $2 zone on a pullback.

IEF – Daily

Our conditional bullish call spread recommendation in VALE was entered on last Thursday’s decline, when we were able to buy the Dec. 2nd $13.50/$15.50 call spread at 64 cents when the stock got into our $13.75 to $13.50 bidding zone. On Friday, the stock closed at $15.45 (with a high of $15.53), and the spread has already doubled in value. Let’s take half off today.

LEN Conditional Bullish Opening Trade

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Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 5 Contracts Dec. 16th $82.50/$77.50 Put Vertical Spreads @ $1.10 Credit.

Total Risk: This trade has a max risk of $1,950 (5 Contracts x $390).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 89

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is If we see a decline to that $84.26 to $81.62 zone. Also note that the cost basis, premium received, as well as the number of contracts when we open this trade will therefore be different from what we post today.

Investment Rationale

Stocks ripped higher, yesterday, while bond rates and the dollar fell sharply, all on the heels of a less than expected inflation number. Ms chased all day long to buy – whether covering shorts or getting long – but was it too much too soon on a single piece of data?

We know that this time of year is a particularly favorable period for stocks (i.e., Nov. thru Apr.), and that the mid-term elections is usually a sweet spot for investing. Now this CPI figure gave bulls everything they wanted to see to believe that the market will rally into year’s end.

Before I jump to that conclusion, let’s see what transpires over the next week. The dollar (DXY), which I have recently been bearish to sell down to 108 to 105.50, is nearing that higher number. Here’s a PPI number out next week that would need to confirm lower levels, or that could put a real damper on the bull party, too. And, heck, inflation is still running at 7.7% — hardly a victory for Americans.

I suspect the Fed will raise rates 50 bps. in December, and with all 6 of Fed governors yesterday making public speeches that did not give bulls anything new to celebrate, let’s not get too enthusiastic about a Fed pivot occurring. (I still don’t think it likely, regardless of yesterday’s inflation number.)

Given the massive upmove yesterday, I can look to buy stocks on a pullback over the next week or so. One name to consider in the homebuilder space (a potential beneficiary of lower rates) is Lennar (LEN), which like practically every name yesterday gapped significantly higher. But I’d be inclined to be a buyer in it on a pullback to that overnight gap area anytime in the next week or so. If we see a decline to that $84.26 to $81.62 zone, we’ll then sell a Dec. 16th $82.5/$77.5 put spread at whatever the then current bid/offer mid-price is.

LEN – Daily

Lastly, yesterday we were able to get into the VALE trade idea I put out earlier this week, looking for bullish entry if we saw the stock get down to the $13.75 to $13.50 zone, which it did yesterday with a low of $13.64. Thus, we were able to get long the Dec. 2nd $13.50/$15.50 call spread for about 64 cents.

Please hold off on entering the DailyPlay trade on ETSY, as recommended in our DailyPlay email of today, as ESTY is about to open 5% higher today. We will inform you when the timing is right to enter this trade.

NEM Conditional Bullish Opening Trade

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Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 10 Contracts Dec. 2nd $43/$40 Put Vertical Spreads @ $0.94 Credit.

Total Risk: This trade has a max risk of $2.060 (10 Contracts x $206).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Neutral

Technical Score: 2/10

OptionsPlay Score: 90

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF we see a decline to $43–$42.75 anytime this week. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

Investment Rationale

Stocks edged higher into Election Day, as many think that Republicans taking at least of 1 of 2 houses (if not both) will lead to a halt to any early-discussed upcoming legislation that could put a damper on the tech and/or energy sectors. Historically, this is a favorable time for the equity market in the mid-term presidential cycle, and of course, you already know that the November to May period is a far stronger one than the May to October time frame.

I write this early enough on Tuesday night to not have any sense of how elections will pan out, or for how investors will take the results going forward.  As I’ve previously said, I believe the House will be won by the Republicans, and I’m not sure about the Senate, but if I had to pick side, I’d say they also end up netting one new Senator in order to take that chamber, too. And what that basically means, is that President Biden won’t likely be able to get any new legislation passed in his final two years of his presidency.

Marketwise, yesterday we saw the popular gold miner Newmont Goldcorp (NEM) continue higher to its best daily close in a month. Given the spike bottom reversal we saw in it, I think we get a move that reaches up to the Propulsion Exhaustion levels (i.e., the blue upward pointed triangle lines) at $47.73 and $48.00. I suspect we’ll have a chance this week to buy NEM on a pullback, especially with yesterday reaching the most recent TDST resistance line (the horizontal dotted blue line) at Tuesday’s high. So, if we see a decline to $43–$42.75 anytime this week, let’s look to sell a Dec. 2nd $43/$40 put spread for what the then current bid/offer mid-price is trading for.

NEM – Daily

Closing Trade

• AIG-96.43% Loss: Buy to Close 6 Contracts Nov. 18 $54/$58 Call Verticals @ $1.68 Debit. DailyPlay Portfolio: By Closing the remaining 6 of 9 Contracts, we will be paying $1,512. We partially closed this trade on November 2 with 3 Contracts at a $2.42 Debit. Our average loss for this trade is therefore 78.97% and our average cost basis to exit this trade is $1.93 Debit.

Investment Rationale

After a back and forth session, bulls took control late in the day and again pushed the market higher – just as they had on Friday. The bullish move off of a failed potential bearish Propulsion Momentum level touch (at SPX 3703 last week) continued, with the index now some 100 pts. higher than there, while also 100 pts. below last week’s high. 

If today weren’t Election Day – and I have no idea how results are going to affect the market tomorrow or going forward – I’d say that the bounce could potentially take the market back up to near last week’s high. And maybe it will go there anyway, but let’s see what Wednesday’s move pans out to be. Bulls are certainly feeling more emboldened, with the rough double-bottom from June and October, along with the lows made right at the 200-WMA.

So, yes, bulls have reason to believe a bottom is in. And I don’t disagree; it seems like there’s enough to think that we have one given what we’ve seen since the October low. However, note that rates have not pulled back at all, and the UST 10-yr. closed yesterday just two bps. beneath the highest close of the year. If they break to new highs and then stay above 4.3%, I think it highly unlikely that the equity market can hold up. If analyst’s lower forward earnings numbers as I expect them to need do, I think it highly unlikely that the equity market can hold up.  And if inflation doesn’t materially pullback anytime soon – which I suspect it won’t – I think it unlikely that the equity market can hold up.

So, let the bulls have their fun for now. As far as I’m concerned, it remains a rally in a bear market.

I want to exit the AIG bearish Nov. 18^th $54/$58 call spread we have on, as it closed above its Propulsion Exhaustion level at $58.39 that I said I would use as the stop on this trade (as well as why I chose the $58 hedge strike in the first place).

VALE Conditional Bullish Opening Trade

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Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 20 Contracts Dec. 2nd $13.50/$15.50 Call Vertical Spread @ $0.96 Debit.

Total Risk: This trade has a max risk of $1,920 (20 Contracts x $96).

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

1M/6M Trends: Bullish/Mildly Bullish

Technical Score: 7/10

OptionsPlay Score: 95

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF the stock pulls back to the $13.75 – $13.50 area. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for this week.

Investment Rationale

Equities had a good Friday rally, but still had a horrible week. What had a good Friday and a good week were metals stocks, as dollar weakness and prior non-breakdowns in gold and copper finally took a toll on those recently positioned short.

One name that I like in the copper space is VALE. It has side-by-side daily Sequential -13s in July and September and last week came back down to bounce on its uptrend line (in purple) and also backfilled against the downtrend line (in green) that it had broken out above in early-October.

As such, let’s look to buy a VALE Dec. 2nd $13.50/$15.50 call spread anytime this week IF the stock pulls back to the $13.75 – $13.50 area. Then, and only then, will we look to buy that spread at the then current mid-price.

VALE – Daily

Fed Chairman Powell did exactly what I expected he would: Raise rates by 75 bps. and continue his hawkish stance to fighting inflation. I saw nor heard anything bullish for stocks in his press conference. Period. End of my statement.

In my opinion, stock investors have very little to look forward to between now and year’s end, and barring an exogenous event (like Putin unexpectedly ending the war, or keeling over, or something as unlikely as that), stocks will likely slide this year to make new 2022 lows – even in the face of the well-known seasonally-favorable period that we are now in.

I suspect that this week’s SPX high of 3912 (which was just 4 pts. above the weekly cloud model’s Base Line of 3908) was the top of Wave 4 of Wave III down from all-time highs. That suggests not only a high likelihood of new lows, but also that the bigger market move has well more downside to go before all is said and done. (This also means that it is still not too late to be exiting long stock positions – whether they be winners or losers.)

Looking into yesterday’s price action, I see two areas I’d like to use to sell into rallies: One is in the SPY $377 to $379 area; the other from ~ $381.50 to ~$383.50.

As far as our portfolio’s positions, I want to look to exit all tactical longs I’ve recently given you (that all expire no later than Nov. 18th.) We’ve already taken a good amount of them off, but let’s not get stubborn about exiting the rest.  You can do all today; some today and some tomorrow; or all tomorrow.  Your choice. But I do recommend being out of these bullish spreads by tomorrow’s close, as I will likely exclusively be looking to be a seller in the immediate future.

As mentioned in Wednesday afternoon’s monthly Q&A webinar, we will stay short the AIG call spread, using a close (or two, your choice) above $58.39 as our reason to exit the bearish trade.

AIG – Daily

Partial Closing Trade

• SPY – 76.00% Gain: Buy to Close 1 Contract Nov. 9th $365/$361 Put Vertical @ $0.36 Debit. DailyPlay Portfolio: By Closing 1 of the remaining 3 Contracts, we will be paying $36. 
• AIG – 44.05% Loss: Buy to Close 3 Contracts Nov. 18 $54/$58 Call Verticals @ $2.42 Debit. DailyPlay Portfolio: By Closing 3 of the 9 Contracts, we will be paying $726. 
• CNC – 94.74% Gain: Buy to Close 4 Contracts Nov. 18th $75/$72.50 Put Verticals @ $0.05 Debit. DailyPlay Portfolio: By Closing 4 of the 8 Contracts, we will be paying $20.
• UNP – 2.38% Gain: Sell to Close 1 Contract Nov. 18 $197.50/212.50 Call Verticals @ $4.30 Credit. DailyPlay Portfolio: By Closing 1 of the 4 Contracts, we will be receiving $430. 

Investment Rationale

I don’t know if you joined me or not, but yesterday I shorted the SPX (I used futures) when the SPX traded 3908, the weekly cloud model’s Base Line that I had labeled as the first meaningful resistance of the current rally from 2022 lows. It yielded about a 50-point gain on the day, which I was happy to take as we go into today’s FOMC announcement (with one major Wall Street firm expecting a MASSIVE move to take place between 2pm ET and today’s close — they just have no idea which direction it will be).

Today brings significant risk to all investors across the major asset classes. I have been steady in my call that the Fed will do a 75 bp. raise in rates. Bulls are expecting only a 50 bp. hike and a softer, kinder Fed. I say they can in no way afford to take their foot off the pedal – upcoming elections or not. For once, I think they will actually do the right thing and keep to their stated goal of reducing inflation – helping to unwind the prior large, easy-money environment they allowed for well too long that caused this mess in the first place.

In my continuous attempt to protect you and do what I think is the best course of action, I am not going to suggest putting on a new position today. (And based upon yesterday’s fairly tight range after the market made its morning drop, we’d not be alone in waiting to see what the Fed is going to do.) I’d expect a fairly tight range for most of today’s trading until the 2pm announcement. After that, it could be a free-for-all – in either direction.

I do want to reduce some of our holdings that expire within 17 days, as we have several of them. Some are gains, some losses. It doesn’t matter to me. Given the possible huge move coming from the Fed news today, let’s just cut overall exposure:

• We’re short 3 SPY Nov. 9th $365/$361 call spreads, up 76%. Let’s take one off this morning.
• We’re short 9 AIG Nov. 18th $54/$58 call spreads, down 44%. Let’s take 3 off this morning.
• We’re short 3 CNC Nov. 18th $75/$72.5 put spreads, up 95%. Let’s take 1 off this morning.
• We’re long 4 UNP Nov. 18th $197.50/$212.50 call spreads, up 2%. Let’s take 1 off this morning.

I have absolutely no idea what is going to transpire later today. So, it makes sense to reduce holdings because whatever analysis got us into the trades originally may not have any meaning come later today. I’d rather be safe than sorry. 

V Bearish Opening Trade

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Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 4 Contracts Dec. 16 $205/185 Put Vertical Spreads @ $5.10 Debit.

Total Risk: This trade has a max risk of $2,040 (4 Contracts x $510).

Counter Trend Signal: This is a Bearish trade on a stock that is experiencing a bullish trend.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 141

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’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

I’ve been keeping an eye on Visa after taking a short position earlier this year, and I see a similar setup after earnings last week. Despite reporting “strong” earnings that beat analyst expectations, raising dividends and authorizing $12B in share buybacks, the stock has rallied up to two major resistance levels. I see this post earnings rally as an opportunity to seek short exposure on Visa rather than a reason to be a buyer.

There is no doubt that Visa is the dominate player in a world shifting to all digital, but the economic headwinds and the rich valuations are concerning. Trading at a 50% premium to the market (25x next year’s earnings) in an economic slowdown and expecting only 10% EPS growth next year is simply too high in my opinion. Couple this with the stock trading up against the Weekly Cloud bottom and its 16-month bearish trendline aligns the timing with my fundamental view. I’m using this opportunity to buy a Put Spread on Visa expiring in December to target a $185 target and cutting losses if we see Visa breaks above the trendline and weekly cloud model.

Buy to Open V Dec $205/$185 @ $5.10 Debit

Visa – Weekly