Partial Closing Trade

• TLT – 64.32% Gain: Buy to Close 2 Contracts Feb 17th $100/$95 Put Vertical Spreads @ $0.66 Debit. DailyPlay Portfolio: By Closing 2 of the 6 Contracts, we will be paying $132.

SPY Conditional Bullish Opening Trades

SPY Conditional Trade 1

View SPY Trade 1

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 1 Contract Feb 10th $387/$405 Call Vertical Spread @ $7.72 Debit.

Total Risk: This trade has a max risk of $772 (1 Contract x $772).

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

1M/6M Trends: Neutral/Bearish

Technical Score: 5/10

OptionsPlay Score: 91

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. The condition that has to be met, before you enter this bullish trade is if we see a pullback to between  $387.70 and $387. Therefore, the credit received for this trade will be different than what we are showing here, which is only acting as a guideline. 

SPY Conditional Trade 2

View SPY Trade 2

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 1 Contract Feb 10th $384/$405 Call Vertical Spread @ $9.55 Debit.

Total Risk: This trade has a max risk of $955 (1 Contract x $955).

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

1M/6M Trends: Neutral/Bearish

Technical Score: 5/10

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. The condition that has to be met, before you enter this bullish trade is if we see a pullback to just north of $384. Therefore, the credit received for this trade will be different than what we are showing here, which is only acting as a guideline. 

Investment Rationale

With stocks bouncing sharply on Friday and remaining above the SPX daily (3814) and weekly (3769) bearish Propulsion Momentum levels without any qualified and confirm closes beneath them, respectively, in the past 2+ weeks, Friday’s 86-point SPX gain keeps the early-2023 picture bullish.

When I look more closely into Friday’s rally in the SPY – as well as the past 15 trading days since price gapped down on Dec. 16th – I see three distinct areas of support that I can discern from both Friday and then collectively since mid-December: They are $387.70 to $387; just north of $384; and $379.50 (the latter being the heaviest-volumed price of all SPY trading over the past three weeks and right by Friday’s low).

As Friday only marked a Setup +1 count – suggesting that we’re not near upside exhaustion from timing models along with a VIX right near 21 – we’ll look to get long two separate 1% portfolio positions on a pullback in price to the first and second of the above written support areas:  1) a Feb. 10th $387/$405 call spread, and then, 2) a Feb. 10th $384/$405 call spread. Each of these spreads are to be entered when price declines to near the first of the two strike prices at what then are their real-time trading mid-prices.

SPY – Daily

Elsewhere, we had on a very good long natural gas call spread in UNG that then collapsed in price as natgas lost over one-third of its value very quickly. Fortunately, we previously sold half the spreads for good profits, greatly reduce the loss on the other half which will go out worthless later this week.

The short Feb. 6th TLT $100/$95 put call is working nicely in just the few days since we put it on last week. We’re up 64% on it right now, so let’s remove 2 of the 6 today.

Jobs numbers didn’t give bulls the look they wanted, and stocks again came off to now finally see the SPX close beneath the 3814 level. A close back above there today probably doesn’t make yesterday’s breach meaningful, but another down day today would not be a good look for recent buyers. A close beneath 3769 today would be a bigger problem without next week materially rallying.

Today is the first Friday of the month, so it’s the big employment report day for the market. It’s a possible make or break day for the market, and it’s the bulls who need to prove themselves because they are continually fighting the downtrend and the onus is on them to show why there is any merit to that approach.

Today is also a weekly option expiration, and when it comes to the SPX, the nearest highest open interest strikes are the 3825 calls (1604) and the 3825 puts (6736). The 3850 calls have 8244 contracts set to expire worthless, and the 3750 puts have 11,545 contracts still open also set to go out worthless. It will be interesting to see if either the 3850s or 3750s get targeted late in the day.

I may very well end up using what happens today to make portfolio changes on Monday, potentially reducing or fully exiting bullish option positions I’ve given you if today dives.

As a heads up, if the GLD high from this week ($173.30) stays the high through today’s close, the Conversion Line will move up to $166.76 next week. We’ll look to play a pullback to that level by then selling the March 17th $166/$162 put spread.

Closing Trade

• GE –92.35% Loss: Buy to Close 1 Contract Jan. 6th $85/$90 Call Vertical Spreads @ $3.77 Debit. DailyPlay Portfolio: By Closing the last Contract, we will be paying $377. We partially closed this trade on December 16 with 3 Contracts at a $0.37 Debit, then on December 29 with 1 Contract at $0.49 Debit, and then again on January 4 with 1 Contract at $1.21 Debit. Our average gain for this trade is therefore 44.05% and our average cost basis to exit this trade is $1.10 Debit.

Investment Rationale

On Wednesday, stocks gave back some of their early gains, as Fed minutes once again gave little to the bulls to grab onto. 10-yr. UST benchmark yields dropped 8 bps. on the day to 3.71%, while gold rallied nicely to near $1860, and it continues to look like it’s heading higher. (You should be looking to start or add long positions on pullbacks. I expect a good year for it in ’23.)

The SPX remains above the short-term level I am leaning on (3814), so I will keep my early-’23 bull bias until proven otherwise. (This is no way changes my overall bearish outlook for the year.) Be mindful that a downside breach of that level following an up-close day (like Wednesday was) that then sees a lower open/lower low/lower close the following day does up the odds that the market likely heads lower.

SPX – Daily

We have one GE short call spread left that expires tomorrow. GE spun out its new healthcare stock yesterday, which unfortunately gave a boost to the stock price at an untimely time for us. We will cover the last spread we have on today.

I have a new idea for us (though something I’ve mentioned in both yesterday’s and Tuesday’s webinars I hosted) that gold is looking good, especially after zooming higher from its false breakdown in the fall. (A major false breakdown usually comes back to test the high end of the trading range it was previously in, or in this case, essentially to a move up to near all-time highs.)

GLD – Weekly

We see that it has now reached both the weekly cloud bottom and 50% retracement level (i.e., the bold red horizontal line) this week. With the GLD now also having gone 8 weeks without touching its moving-higher Conversion Line (in magenta), we may see a pullback in the next few weeks down to it. When and if it gets there, I’ll want to buy that decline that touches the Conversion Line (it may be higher than where it is now). You can do that by simply buying the stock outright, or selling a then ATM/$162 put spread (with a three-month expiration), or buying a call spread (but only if able to buy for no more than 30% of your chosen strike differential). Right now, calls are priced quite expensively.

Generally, conditional trades that I recommend have a one-week time period to enter. This one, I will leave open longer than that given my belief that gold will be a good winner this year.

META Bullish Opening Trade

View META Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts Feb 3rd $123/$113 Put Vertical Spreads @ $3.72 Credit.

Total Risk: This trade has a max risk of $1,884 (3 Contracts x $628).

Counter Trend 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: 87

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 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

Stocks first rallied and then declined on a PMI figure that didn’t give bulls any more juice to push higher. Stock indexes were down yesterday, but at least importantly in the short-term, the SPX 3814 level still held as support on the close.

I find it interesting (and anguishing) how difficult it was to come up with a DP for today that meets our general guidelines for putting on vertical call or put spreads that also don’t cost too much or collect too little, respectively. Option prices seem to be the wrong way for most ideas I would enter based upon the chart work I do. But, after over an hour looking, I found an idea with right pricing for what I want us to do.

META has advanced sharply after bottoming in the fall at ~$89.  It’s now $124 and was up nicely in yesterday’s down tape. Though it is now close to filling a prior unfilled gap, I think analysts are just getting started in upgrading it, and that it still has decent upside relative to downside risk. As such, let’s look to sell a Feb. 3rd $123/$113 put spread. It closed on Tuesday at $3.725 mid- , which is 37% of the strike differential. Meta reports earnings on Feb. 1, so we will be out of it just before then if it trades our way over the next month.

META – Daily

Last week we took off one of three remaining short GE Jan. 6th $85/$90 put spreads that we’ve made good money on since entering almost a month ago. Let’s take one more off today, as price is getting closer back to the $85 level. The last one we’ll take off tomorrow after we see what the Fed minutes say later today. 

TLT Bullish Opening Trade

View TLT Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts Feb 17th $100/$95 Put Vertical Spreads @ $1.85 Credit.

Total Risk: This trade has a max risk of $1,890 (6 Contracts x $315).

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

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

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 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

UST 10-yr. bonds rallied XMAS week to where I have resistance pegged near 3.86%, so let’s look to sell a TLT Feb. 17th $100/$95 put spread for $1.85 credit, which represents a 37% differential between strikes. (With bond futures trading down as I write this Monday night, the TLT is now trading above $100, so we should actually be able to get a bit more for this spread than quoted based upon Friday’s closing mid prices.)

TLT – Daily

Just a quick update on GE: With the stock again finding support at its cloud top, let’s remove another 1 of 3 remaining short Jan 6th $85/$90 call spreads we’re short.

Partial Closing Trade

• GE – 75% Gain: Buy to Close 1 Contract Jan. 6th $85/$90 Call Vertical Spreads @ $0.49 Debit. DailyPlay Portfolio: By Closing 1 of the remaining 3 Contracts, we will be paying $49.

A very rough day for bulls yesterday, though the late rebound into the close brought the SPX back above 3814, keeping that as the important short-term support level. First level resistance has moved lower to 3917/3932. (Both areas are highlighted on the chart below.)

SPX – Daily

Without a new closing low for December tomorrow, the downward Setup count will flip to a +1, removing the bearish momentum we’ve seen since the peak two Tuesdays ago on the CPI spike higher that marked the top.

Today is a weekly option expiration and the last potentially meaningful economic reports of the year, as well as the last day most PMs will be in the office this year.

Yesterday saw a down close in GE, and yesterday I said that if the stock was down on the day going into the close, we’d take off 1 of the remaining 3 credit call spreads we had on. (It closing mid-price was 67 cents, so you should have been filled right about there.) For now, we’ll keep the final two of these that we put on at a $1.96 credit.

This is my last communication with you through Tuesday, Jan. 3, when I’ll return to do our next weekly technical outlook webinar. I wish all of you, our loyal readers, a very happy holiday season and good health and prosperity for the new year.  – Rick

Stocks got a rally right on cue from what was my downside target of 3814, surely aided by solid earnings from both Nike and Federal Express and the best Consumer Confidence number since April. The SPX jumped 57 points to 3874 and marked its second up day in a row.

Today and tomorrow are really the last two days of the year that most PMs are likely working, meaning that they will finish adjusting their positions to be the way they want to end the year with, barring something unexpected happening next week. Personally, I’m not looking for a move to get materially above the 3948 level (highlighted on the daily chart below in a yellow ellipse), so it would indeed surprise me to see anything meaningful above there occur in a Santa Claus rally.

SPX – Daily

If I’m not mistaken, we have four conditional trades still awaiting entry. I’d like to see us get into any/all of them by Friday’s close (not because they couldn’t be possibly entered into next week, but because I am off next week and we will not be writing Daily Plays next week (nor doing any webinars). So, it’s your choice if you want to enter any of these ideas should their entry price zones be achieved after Friday.

There isn’t much to do with the current open positions I’ve gotten you into. The TSLA looks like we’ll lose our entire paid-out premium, and with 9 days to go till expiration, we might as well see if there’s any considerable rally to come to reduce that full loss from occurring. Should th stock see a large one-day upmove in the next few trading days, take advantage of it to exit with a slightly better price than where it’s at now.

The one thing I will do today is if GE is trading down on the day going into the close, let’s take off 1 of the remaining 3 short call spreads we have on. Otherwise, we’ll just sit tight until January.

NVDA Conditional Bearish Opening Trade

View NVDA Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Jan 6th $170/$175 Call Vertical Spreads @ $1.50 Credit.

Total Risk: This trade has a max risk of $2,100 (6 Contracts x $350).

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

1M/6M Trends: Neutral/Mildly Bullish

Technical Score: 6/10

OptionsPlay Score: 101

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 NVDA trade back to the $168 to $170 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 a week unless advised otherwise.

Investment Rationale

A quiet day for stocks on Tuesday, with gains in all four major US equity indexes (though not the NDX). The SPX posted its first up day in the last five, and it is holding, at least for now, the level I expected it to (i.e., the bearish Propulsion Momentum level at 3814 and its cloud (the latter being extremely narrow right now).

SPX – Daily

We have several conditional trades that have not yet reached their respective entry points. Consider all those active open recommendations through week’s end. (I am not looking to enter new trades the last week of the year.)

Here’s another one to add to the list: Last Tuesday’s spike high in NVIDIA (NVDA) hit its daily Propulsion Exhaustion level at $181.73 and then dove since then. You can see that yesterday closed very close to where the bottom of its “Value Range” is (i.e., the yellow horizontal area from roughly $160 to $172.50). If we do see a market rally now from the reason I showed above in the SPX, this could easily get back up to the high end of that same Value Area.

Therefore, if we see NVDA trade back to the $168 to $170 area, we’ll then look to sell the Jan. 13th $170/$175 call spread for what is then its current bid/offer spread mid-price. (The current ATM/$5 OTM call spread is fetching about 45% of the strike differential, which as a seller, I am always content with receiving.)

This is also a good way of seeing that even when the VIX is relatively low, some individual stocks have high enough volatility that you can still sell their options.

NVDA – Daily

Closing trade

• GNRC – 102.50% Loss:  Buy to Close 6 Contracts Dec 23rd $100/$95 Put Vertical Spreads @ $4.05 Debit. DailyPlay Portfolio: By Closing all 6 Contracts, we will be paying $2.430. 

MRNA Conditional Bullish Opening Trade

View MRNA Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts Jan 20th $180/$175 Put Vertical Spreads @ $1.77 Credit.

Total Risk: This trade has a max risk of $1,938 (6 Contracts x $323).

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

1M/6M Trends: Bullish/Bullish

Technical Score: 10/10

OptionsPlay Score: 94

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 it pullback to the $181 to $176 range. 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 a week unless advised otherwise.

Investment Rationale

Stocks remained under pressure as prior bulls keep getting forced out of their longs, with year-end tax loss selling adding further fuel, and time running out for Santa Claus rally-thinking bulls that it’s actually going to happen. The SPX made a low of 3800 on Monday, filling the bottom of the 40+ pt. gap at 3818, while also holding above its daily bearish Propulsion Momentum level of 3814. This area is where the market needs to hold for bulls to have any sense that even a small trading bounce can occur before year-end. Yesterday’s new low for this current decline brought the daily bullish Propulsion Momentum level down to 3952, which unrelatedly is right near the daily Conversion and Base Lines’ values. (All three are currently in the highlighted cyan-colored ellipse. That’s your closest resistance area right now.

SPX – Daily

Let’s do some house-cleaning of non-performing trades that I’ve recently recommended:

1. Let’s exit the GNRC Dec. 23rd short $100/$95 put spread that expires on Friday. We’re down just over 100% and that’s basically the max loss I’m willing to take on an option position.
2. If TSLA closes above $156.80 today, it will confirm the -13 downside exhaustion signal and give us a better chance to shortly exit with a lesser loss than the 91% we’re down now. Our long $190/$225 call spread expires on the 30th, so we need see this lift quickly in price to be able to possibly cut the loss by a third or half.  If we were to see anything near $175+ in coming days, I’d take that “as good as it’ll get” and just exit.
3. On Dec. 12th we exited half our long UNG $16.50/$18 call spread, up ~70% on that half. Price has come back down to the hedge strike (i.e., $18), so today let’s take off another 5 of the remaining 10 contracts we have on.
4. The four conditional trades in ( WBA, SPY, TSLA and NFLX ) are still open trade ideas to initiate bearish trades on if we see rallies up to my preferred entry zones.

With my having four pending bearish ideas to potentially get into, I’m going to give you a bullish one to buy on a pullback. Moderna (MRNA) has recently rallied to its best level since January ’22, finally breaking out above an 8-month trading range. If we see it pullback to the $181 to $176 range (I’d probably enter the spread when/if I saw price hit right near both of those prices, meaning I’d do half at each of those levels), we’ll look to sell the Jan. 20th $180/$175 put spread at the then bid/offer mid-price. Right now, the Jan. 20th ATM/ $5 OTM is going for about $2.40, meaning you’re collecting 48% of the $5 strike differential. I’d think that it should be somewhat similar if we get down to our entry zone highlighted in the green box in the below chart.

MRNA – Daily