View UAA Trade

Strategy Details

Strategy: Short Cash Secured Put

Direction: Bullish

Details: Sell to Open 2 Contracts June 24, 2022 $9 Cash Secured Puts @ $0.40 Credit.

Total Risk: This trade has a max risk of $1,720 (2 contracts x $860 per contract). 

Counter Trend Signal: This is a Bullish strategy on a stock that is experiencing Bearish 1M and 6M trends.

1M/6M Trends: Bearish/Bearish

Technical Score: 1/10

OptionsPlay Score: N/A

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. 

Investment Rationale

Here’s a bit of a different play idea than I’ve given you in the past, and it involves selling a Cash Secured Put with my willingness to purchase and hold the shares of stock if exercised. (If your brokerage account doesn’t let you sell Cash Secured naked Puts, then pass on this trade idea for now, but I’d suggest looking around for another firm that does allow it; most do.)

I’m looking at shorting the Under Armour (UAA) June 24th $9 puts for $0.395 based on Monday’s mid-closing price. (SPX futures are down over 30 points as I write this, so we could easily get more than this amount of premium tomorrow after the open.) Earnings are out of the way till August so that’s not going to be an issue. This comes down to playing the range we’ve seen for the bulk of the past four years (mid-$20s to high-single digits). With the weekly Setup on a -7 and the Sequential Countdown on a -12, I’m game to sell the $9 puts to make my effective cost if exercised ~ $8.60.

That’s not a bad entry for a buy-and-hold strategy near the bottom of the range. Again, only do this Daily Play idea if you are willing and able to buy at least 100 shares of stock for every put option you short. If you use our theoretical $100K account to size your trades and don’t want to risk more than the typical 2% on any single trade, then you’d sell 2 of these put options (representing $1800 worth of potential stock purchase at expiration). If the stock holds here or rallies and you don’t get exercised, you collect about $80 total premium on the 2 puts. So, we’re getting paid to watch and wait to see if we could buy the stock at $9. I’m totally fine either pocketing the premium or getting exercised.

UAA – Weekly

View TSLA Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts June 17, 2022 $620/$600 Put Verticals @ $6.55 Debit.

Total Risk: This trade has a max risk of $1,965 (3 Contracts x $655 per contract).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 127

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. 

Investment Rationale

Our bearish trade idea for today is Tesla Inc. (TSLA) which is driven by concerns around inflationary pressure as well as consumer slowdowns. As a key level of $700 has been broken to the downside, while it also failed to close above this level on Friday, we are taking a bearish stand on TSLA. We will only be paying about 1/3 of the vertical width for this out-of-the-money (OTM) Put Debit Spread and we will be risking about 1% of the stock’s value per contract. 

As we head into Friday’s action, bullish traders can cling to the fact that the weekly QQQ chart’s Lagging Line still has not breached the cloud bottom beneath it (highlighted in the below chart in a yellow ellipse). From a trader’s perspective, this last place a structural bull market lies before it turns into a bearish one is also the lowest risk (i.e., tightest sell-stop) place you can buy. (Think about it: almost anytime else that you’d be buying in an upward moving market, your sell-stop would have to risk far more money than what it would need to here and now.) 

QQQ – Weekly

Moreover, the daily QQQ chart is still within the context of its first and only Combo -13 signal of the whole 2022 decline, also suggesting downside exhaustion is at hand if the price keeps above $277.81.

QQQ- Daily

So, today’s close becomes very important by telling us if the weekly cloud model can continue holding onto its last support level before it structurally turns pure bearish & into an even more defined “sell-on-rally” mode. I mentioned to you in Monday’s morning weekly outlook webinar that I had purchased some SPYs for myself at $391, knowing that right near there was a key area from its weekly cloud chart (and also knowing that the Qs Lagging Line was quickly nearing its last bullish support level). I’m hanging on to that trade for now, but also know that I’m out of it if these aforementioned levels give way.

None of us know which way the market is going to move in a single day, and based upon some of the recent price action, even the algos are getting as pummeled as anyone else who is playing the game. But what I can do and consistently alert you to are the most important levels that institutions care about and shift money against. (And as I said in my presentation last week in Las Vegas at The Money Show to the crowd who heard me speak, it’s not an oversold RSI, or a 20-day moving average, or a Fibonacci retracement, or the like that moves institutional money. It’s far more so than the models that I continually present to you each and every day at the core of the work we do. And believe me, it’s the institutional money flows that you want to be aligned with; not those of the individual investor.

Enjoy the weekend.  We’re right back at it Monday morning at 8:45 am ET with next week’s Market Outlook webinar

View T Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy 56 Contracts June 10, 2022 $20/$18 Put Verticals @ $0.35 Debit.

Total Risk: This trade has a max risk of $1,960 (56 contracts x $35 per contract). 

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

1M/6M Trends: Bullish/Bullish

Technical Score: 10/10

OptionsPlay Score: 118

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. 

Investment Rationale

AXP has traded down to near the low $150s four additional times since basically starting a run higher Even with the market getting trashed as it has been, there are some names that are rallying. One of them is AT&T (T), which on Tuesday posted a daily Sequential +13 signal (i.e., potential upside exhaustion) right by a clear resistance line (at $20.75) and a prior broken uptrend test (the green dashed line). With yesterday’s market weakness, the stock sold down to $20.23, presenting us an opportunity to consider buying the June 10th $20/$18 put spread for $0.395 based upon yesterday’s closing mid prices. (That cost is about 20% of the strike differential.) The huge unfilled gap is staring at us, so I think that any further market drubbing will likely take this name down, too, and could — in a washout — go and fill the gap.

View AXP Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell 3 Contracts June 24, 2022 $160/$150 Put Verticals @ $3.25 Credit.

Total Risk: This trade has a max risk of $2,025 (3 contracts x $675 per contract). 

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

1M/6M Trends: Bearish/Bearish

Technical Score: 6/10

OptionsPlay Score: 85

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. 

Investment Rationale

AXP has traded down to near the low $150s four additional times since basically starting a run higher earlier on in May 2021. (See the 5 yellow-colored ellipses and accompanying horizontal, purple-colored support line near $152.) We can certainly call that a “strong support” level.

With the SPX having made, what I deemed a trading bottom last week, and AXP marking a daily Setup -9 and a Sequential -13 counts, in the past 5 days, I think we can go ahead to play this stock bullishly by selling the $160/$150 put spread.

• CVX: 106.96% Gain: Sell to Close 4 Contracts Jun 3, 2022 $160/$170 Call Verticals @ $7.43 Credit.

With crude oil on verge of breaking out above long-term resistance at $114.83 (the 2011 reaction high that the monthly chart has not been close above since), our long CVX June 3rd $160/$170 call spread is now up over 100%, along with seeing the underlying’s price close ($173.01) above the higher “hedge” strike price. I will almost always remove half (or more) of a long call spread at that higher strike, and as such, today we will remove 4 of the 6 CVX options we are holding. Yesterday, the spread went out at $7.59 (mid-price) vs. our long entry at $3.59. 

DailyPlay Portfolio: By closing 4 of the 6 Contracts, we will be receiving $2,972.

CVX Daily Chart

View F Trade

Strategy Details

Strategy: Long Call

Direction: Bullish

Details: Buy to Open 8 Contracts January 20, 2023 $13 Calls @ $2.34 Debit.

Total Risk: This trade has a max risk of $1,872 (8 Contracts x $234 per contract).

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

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 66

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. 

Investment Rationale

Our bullish idea today is Ford (F). F has declined 53% since its all-time high in Jan 2022 and experienced a bounce higher from the $12 level last week. This decline means that F is now trading at roughly 13x earnings which is a significant discount from its historical average. Additionally, F’s fundamentals remain strong with solid EV demand, good EPS forecasts and having its new EV cars oversubscribed. The next clear resistance area is near the $16 level. 

View ARKK Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell 20 Contracts June 10 $39/$37 Put Spread @ $1.02 Credit.

Total Risk: This trade has a max risk of $1,960 (20 contracts x $98 per contract).

Counter Trend Signal: This is a Bullish strategy on an ETF that is experiencing bearish 1M and 6M trends.

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 98

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. 

Learn how to size this trade for your portfolio size

Investment Rationale

Here’s an idea for those who are willing to stab for a bottom in what has been one of the most trashed names we hear and read about daily. Of course, picking true falling-knife bottoms isn’t easy, but I’ll share with you that I’ve just purchased this stock myself for the same reason we’re going to look to sell a put spread in it today.

The name is none other than Cathy Woods’ ARKK fund ETF (ARKK). It has finally fallen to a level that I am a willing buyer of it in my own account, with my belief that Cathy’s long-term “innovation stocks” concept is right (but her complete misunderstanding of what investors would do to high multiple names cost her and her investors dearly). Down here, I have a whole different view of the ETF than I did at $100 +.

I have long waited and hoped for the opportunity to be a buyer down here, as it has sold down to both its monthly cloud zone and TDST Line ($39.41). As such, let’s look to sell a June 10 $39/$37 put spread for $1.02 (based upon yesterday’s closing mid-prices). That collects about 43% of the $2 spread differential, and is approx. a 26% return on an annualized basis. Clearly, this is a bet that we’ll see some bounce between now and June 10, about a month from now.

ARKK – Monthly

Special Notice

This is a conditional trade idea and the trade should not be taken immediately. Please read the Investment Rationale for more information on this trade. Also, keep in mind that the Credit received, the Max Risk, the Max Reward, as well as the OptionsPlay Score, will be different than what you see in this email, as we are waiting for the price to move more favorably before we enter the trade.

View RCL Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell 5 Contracts June 24 $65/$70 Call Vertical @ $1.32 Credit.

Total Risk: This trade has a max risk of $1,840 (5 contracts x $368 per contract). As this is a conditional order, the number of Contracts could change depending on the Total Risk at the time of opening the trade. We will base the numbers of Contracts on roughly $2,000 of Risk.

Trend Continuation Signal: This is a Bearish strategy on an ETF that is experiencing bearish 1M and 6M trends.

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 99

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. 

Learn how to size this trade for your portfolio size

Investment Rationale

With the market unable to hold gains and again getting slammed yesterday, more support levels have been taken out as sellers continue to overwhelm any short-term buying that comes in. SPYs gave up another 6+ points yesterday, breaking the $396 level (which was a place I had just bought back a small amount of the SPYs I had sold out of earlier this year). We may very well get down to the SPX 3617 target that I went out with a few weeks back, and possibly even sooner than I expected.

In general, because I tend to be a seller at extremely high prices in bull moves and at extremely low prices in bearish moves, it behooves me to simply sell names now that have already been crushed. Sure, they could still go lower, but more importantly, it makes it much harder to control risk when you play the direction of the trend when the stock is already well into that trend. So for me to do so, I need to see a pretty clear reason that there’s likely a good amount to go in that trend AND I can control my risk in a logical way.

This leads me to the chart of Royal Caribbean Group (RCL), which last week reported earnings that the Street did not like. In its large decline from the upper-$70s to the current $60 in the pasts two weeks, the one thing that stands out to me is that the weekly cloud’s Lagging Line has broken beneath the bottom of its cloud for the first time on the whole bullish move that’s been in place since the Covid 2020 low.

There is someone (or a group) of large players buying near this $60 level, based upon the Volume Profile distribution of prices (shown on the right side of the chart). Perhaps, it’s because ~$60 closes the gap from Q4 ’20. And if their buying creates a bounce, I wouldn’t mind selling a rally into the mid-$60s where very little volume has traded, allowing us to then sell a June 24th $65/$70 call spread. On Wednesday, that spread went out at $1.32 mid, but this will be different when/if the $65 becomes the ATM. (This is a conditional order, meaning that we aren’t going to put this on until/if we see a rally to the mid-$60s.)

Now that earnings are out of the way, and there is little significant catalyst for this to move much higher, the heaviness of this two-week move along with the cloud break makes me want to keep a bearish stance until this may very well mark a weekly Setup -9 some six weeks from now.

• NYCB 95.83% Loss: Sell to Close 15 Contracts Jul 15, 2022 $13/$11 Call Verticals  @ $0.03 Credit. DailyPlay Portfolio: By closing 15 Contracts, we will be receiving $45.