View ASHR Trade

Strategy Details

Strategy: Long Call

Direction: Bullish

Details: Buy to Open 4 Contracts January 20, 2022 $25 Calls @ $5.10 Debit

Total Risk: This trade has a max risk of $2,040 (4 Contracts x $510 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: 79

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 the Xtrackers Hvst China ETF. This trade is based on gaining overseas exposure at a time when US equities are very volatile. Price has declined to a long-term ascending trend line which provides an ideal risk/reward bullish opportunity. From a fundamental perspective, China’s April economic numbers have been poor with significant hits to manufacturing and retail sales. However, there has been an uptick of factories coming back online as well as a resurgence in domestic travel and easing financial conditions. 

Closing Trade

$NKE 88.43% Loss: Sell to Close 6 Contracts May 27, 2022 $128/$140 Call Verticals @ $0.58 Credit. DailyPlay Portfolio: By selling 6 Contracts we will receive $348.

We’re still short a PEP May 6 $165/$170 call spread that expires today.  We will cover this spread on the open to avoid exercise issues. The spread closed yesterday at $4.13.

In my 40+ years of being in the market, I don’t recall seeing a 26-hour roller coaster as we saw since Powell’s Wednesday press conference. Certainly not in percentage price movements in the stock indexes. It’s been truly amazing, and it’s why I’ve urged you to cut down on how much trading you do and what your new trade size position is. Clearly, it’s treacherous out there and your focus needs to be on “long-term survivability”. It’s the only thing that matters in a super high-volatile environment.

The key weekly SPX cloud level I’m focusing on is 4115. In my view, any Friday close beneath there ups the odds that the pressure will continue for what could ultimately lead to my 2022 downside target of 3617. A QQQ close today beneath $309.62 likely leads it to a new leg down, for it too, especially if the SPX breaks its level, too.

No new trade idea today. Until we see where these two indexes close, we’re not looking to put on new exposure in either direction. 

I’m glad it’s Friday, and am looking forward to a nice weekend which will end with me in Las Vegas on Sunday for me to speak there on Monday afternoon at the Money Show. If you plan on being there, stop by after my presentation and say hello. Happy Mother’s Day to all.

– Rick Bensignor
Chief Market Strategist

Closing Trade

• PEP: 79.57% Loss:  Buy to Close 8 Contracts May 6, 2022 $165/$170 Call Verticals @ $4.13 Debit. We will cover this spread on the open to avoid exercise issues. The spread closed yesterday at $4.13. DailyPlay Portfolio: By closing 8 Contracts, we will be paying $3,304. 

View ORCL Trade

Strategy Details

Strategy & Direction: Short Put Vertical Spread – Bullish

Details: Sell 6 Contracts June 17 72.50/67.50 Put Spread @ $1.36 Credit

Total Risk: This trade has a max risk of $2,268 (6 contracts x $378 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: 4/10

OptionsPlay Score: 81

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

Fed Chair Powell gave investors a pleasant surprise (i.e., not intending to raise rates by 75 bps. at any subsequent 2022 meeting), leading to the best-up day for the SPX in a couple of years. Add that to the SPX holding right against the bottom of its weekly cloud this week and we have a good line in the sand for now. (In the future, getting beneath this week’s low will likely lead to a bigger decline down to my 2022 worst-case scenario 3617 target.) But for now, the SPX and QQQ have both held precisely where they needed to.

While looking for a new bullish Daily Play position to enter, I came across the Oracle (ORCL) chart, which looked interesting not only because it marked a daily Setup -9 yesterday, but it did so right into a support level made up of the two prior lowest closes of 2022 (i.e., the zone created by the two horizontal purple lines).  I suspect that by week’s end, we should get a chance to see price come back down to the $74 to $73.50 area on an intraday basis, when I’d then look to sell a June 17th $72.50/$70 put spread (for whatever the mid-price is at that time).  

So, yes, this is one of those “conditional” trade ideas Tony and I mentioned we’d be soon adding to the repertoire of Daily Play ideas we give to you.  Yes, it means that you should set a price alert on whatever charting platform you use to signal you that it’s time to look to put on this idea.  And yes, we will do our best to send you a timely email reminding you that it’s time to get into the trade.

For now, the SPX and QQQ are both holding key weekly cloud model support (i.e., the SPX at the bottom of its cloud; the QQQ from the Lagging Line hitting the top of its cloud).  I believe that seeing breaks of those levels – most especially on Friday closes – will start another downward leg that will make one glad that they had previously lightened exposure on rallies (from both earlier this year, and possibly even from the one that may be starting this week).

With today being the May FOMC rate announcement at 2pm ET, and Fed Chairman Powell holding his press conference shortly after, I am not looking to put on any new positions today.  I expect some potential morning position-squaring to bring some volatile trading, and then a more muted 11:30am to 2pm lull into the announcement.

If the Fed gives the expected 50 bp. rate hike at 2:00, then it will all be about Chair Powell’s underlying tone in his comments that will drive the market the rest of the day.  I suspect that only a 25 bp. hike would be a very pleasant surprise, with the market then likely ripping higher.  And a surprise 75 bp. rate hike would not likely be taken kindly, with a potential swoon looking the opposite to what we saw on Monday from 3-3:30pm ET, when the SPX rallied 80 points.

More fun and games to come tomorrow after I decipher Wednesday’s action and closing price. 

– Rick Bensignor
Chief Market Strategist

View CVX Trade

Strategy Details

Strategy & Direction: Long Call Vertical Spread – Bullish

Details: Buy 6 Contracts June 3 $160/$170 Call Vertical @ $3.59 Debit

Total Risk: This trade has a max risk of $2,154 (6 contract x $359 per contract). 

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

1M/6M Trends: Bearish/Neutral

Technical Score: 10/10

OptionsPlay Score: 106

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 pure trader’s trade in the energy space: Chevron (CVX) already reported quarterly earnings last week, and still has held onto the horizontal support against the March lows of $155.25. In fact, you can see that that same area has held on several days in the past week — never once closing beneath it. We also see a defined double-top near $175, with a new active Propulsion Full Exhaustion level at $170.64 (highlighted in yellow). Given the huge down move yesterday in the market that reversed to close higher, I’m thinking that the overall market (SPX and QQQ) has at least held (for now) their respective important weekly cloud model support that I showed and discussed in Monday’s Technical Market Outlook video. 

With crude oil having recouped large early losses yesterday to also close up on the day, we are going to buy a short-dated CVX June 3 $160/$170 call spread for $3.59 based on Monday’s closing mid-prices. We will stop ourselves out of the long call spread if we see a single daily CVX close beneath $156.24 (last Wednesday’s low). Note: if in this volatile environment you are not comfortable risking the typical 2% of your portfolio on a trade (in this case, 6 contracts on a theoretical $100K portfolio, then do less. No one is suggesting you trade more than what your comfort level is.) Yesterday was a great example of how flaky the market can move right now, so I, too, have cut back size in my recent trading.

View CVS Trade

Strategy Details

Strategy: Put Debit Spread

Details: Buy to Open 7 Contracts June 17, 2022 $95/$85 Put Vertical @ $2.76 Debit

Total Risk: This trade has a max risk of $1,932.00 (7 contracts x $276 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: 9/10

OptionsPlay Score: 145

Our trade idea for today is CVS Health Corporation (CVS). Please note that this is a bearish earnings play with CVS reporting earnings on Wednesday, May 4th. CVS is part of the Health Care sector (XLV) which it is currently underperforming on a relative basis heading into earnings. On an absolute basis, CVS has now broken below the major support level at $100 which provides evidence of further downside. Both 1M and 6M trends are now bearish and the breakdown below support provides a good risk/reward bearish opportunity. 

After our buying the QQQ call spread Thursday morning when it pulled back to our entry level of $320 (after opening even higher than that) we saw the Qs reach as high as $330 during the session, giving our Daily Play May 20^th $320/$344 call spread trade a very solid Day 1 gain. However, the official 4pm QQQ close at $328.01 basically disappeared in after-hours trading, with the 8pm close at $322.75.  Easy come, easy go.  And that’s why – especially in this market – celebrating any “paper gains” before they’re actually booked is an exercise in futility, and almost assured disappointment.

Amazon blew up after earnings.  Intel sank, too.  Apple rallied but the subsequent analyst call stating “no more forward guidance” was not taken well by investors, so it abruptly turned around and fell some 4% to head into dinnertime with my thinking that, “Oh boy; Thursday’s rally was going to disappear on Friday.  Wouldn’t that mess up a lot of heads.”

As I write this late Thursday night, SPX futures are now only down 17 points (they were down as much as ~60 points earlier this evening) while Nasdaq futures are down 146 points (having been down over 300 pts. earlier).  Professional traders and investors are getting made to look foolish almost daily, so don’t worry that you might also be having a hard time with the market.  I promise you that everyone is.

QQQ – Thursday 4/28 2-min. chart (including after-hours)

I will not put out a new trade idea for you today, because market movement is so erratic.  Add that today is a Friday AND the last day of the month and I am very happy to simply watch today’s shenanigans from the sidelines.  We’ll see if any new news comes out over the weekend to give investors a better chance of what’s coming next.  Rest up for another rousing week next week.

Don’t forget to login on Monday at 8:45am ET for the weekly Options Play Macro Market Outlook. 

– Rick Bensignor
Chief Market Strategist

View QQQ Trade

QQQ Bullish Opening Trade Signal

Strategy Details

Strategy: Call Debit Spread

Strategy Direction: Bullish

Details: Buy 1 Contract May 20 $320/$344 Call Vertical @ $9.45 Debit

Total Risk: This trade has a max risk of $945 (1 contract x $945 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: 77

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. 

8 am Update:

With futures now up significantly more than they were last night, I would NOT chase after the QQQ trade UNTIL the QQQ gets back down to the $320 area so that the $320 call is the at-the-money call

Investment Rationale

Let’s start by looking at the technology market, of which the QQQ is a good proxy (as is XLK, even more specifically). The “Qs”, as they are known, saw its rally fail yesterday and actually close a bit beneath its open. In Japanese candle terms, that open and close at virtually the same price is known as a “doji”, and it usually suggests “indecision” when it shows up in a strongly trending market.

When we look at recent QQQ history, we see that a doji also showed up in early March – one that led to a 10% rally the balance of the month.  Now we see one again – virtually at the same level and also following a large down day the prior day. (See the two cyan-colored ellipses in the below chart.)  

Given that some major tech name earnings were better than expected yesterday, as I write this at 7pm Wednesday evening, it would appear as if the market will open decently higher on Thursday (Nasdaq futures are up 155 right now; ~+1.2%). 

Bulls clearly want to see yesterday’s low hold, as it was also the same low made back in May 2021.  Wednesday also happened to have marked a daily Aggressive Combo -13 signal.  So, let’s buy a one-half position (i.e., theoretical $1000 amount) in the QQQ May 20 $320/$344 call spread for about $10 based upon Wednesday’s closing mid price. (That’s 1 contract.)  If we see any major break of yesterday’s lows, we’ll exit.

Closing Trade

• WFC: 92.12% Loss: Buy to close 10 Contracts May 13, 2022 $45/$48 Put Verticals @ $0.57 Credit. $2.00 Debit. Despite outperforming the market and its sector after earnings, WFC’s decline below its major support level at $46 warrants closing out our long exposure in this weak bearish market. We are closing this position out completely. DailyPlay Portfolio: By closing 10 Contracts, we will be paying $2,000. 

View MET Trade

MET Bearish Opening Trade Signal

Strategy Details

Strategy: Short Call Vertical Spread

Strategy Direction: Bearish

Details: Sell 12 Contracts June 3 $69/$72 Call Verticals @ $1.28 Credit

Total Risk: This trade has a max risk of $2,064 (12 contracts x $172 per contract). 

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

1M/6M Trends: Mildly Bearish/Bullish

Technical Score: 9/10

OptionsPlay Score: 104

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

Yesterday’s reversal higher has bulls lickin’ their chops that the bottom is in. I say that one day does not make a bottom – despite how oversold the market was or how bearish the individual investor is. It’s a single data point that would need to prove itself out days from now and a couple of weeks from now to be valid.

When I look for a name that looks weak but perhaps not at its logical low, I see that Metlife Inc. (MET) has been in a trading range all year, with last Wednesday’s/Thursday’s peak at the top of the range that was also accompanied by an Aggressive Sequential +13 signal and a new completed Setup +9 count. Though yesterday made a potential “hammer” bottom (depending upon what happens today and tomorrow), the $69.50 to $70.50 zone should be decent resistance as it was where all the lows were the past month.

Let’s look for this to shortly stall on any continued rally, and still make its way down to the bottom of the range (~$62) before we see a better bottom. Therefore, we are going to sell a June 3rd $69/$72 call spread for $1.27 based upon yesterday’s closing mid prices. That credit spread will take in about 42% of the spread differential – in line with many credit spreads we put on. MET does report earnings early next week (on May 4th), and that should be the main catalyst for its price movement after its release (besides any major market movement).