Adjustment Trade

C Trade Adjustment – 29% Unrealized Loss. Roll October 29, $72 Call to November 19, $73 Call to collect more premium:

• Buy to close October 29 $72 Call @ $0.04 Debit
• Sell to open November 19 $73 Call @ $0.66 Credit
• This results in a reduced cost basis for the C Call Diagonal Trade from $3.81 to $3.25. 

DailyPlay Positions Outlook:

The short leg of the C diagonal spread will expire today and we continue to offset the trade cost of the long C call option by selling an OTM call to reduce the cost basis of the C Dec 17 $70 Call and collect more premium. This results in a new cost basis of $3.25 for the C diagonal trade. 

As a volatile earnings week comes to a close with most of the “Big Tech” names reporting a mixed bag of earnings, the major indices continue to grind higher. However, disappointing outlooks for AMZN and AAPL’s earnings yesterday after the bell will likely result in SPY and QQQ opening lower with some volatility expected this morning. 

Prakash Vijayanath
Analyst

View PDD Trade

The bearish DailyPlay for Thursday, October 28th is Pinduoduo Inc (PDD). PDD’s exposure to Chinese markets continues to weigh on performance. 

Technical View

• Failed retest at 100 D EMA and strong decline. 
• Bearish 1M and 6M trends
• Very weak technical score – 2 out of 10

Fundamental View

• Increased regulation in China poses a risk for growth 
• High exposure to Chinese markets. Demand is expected to be negatively impacted.
• Earnings Nov 24 

As this is a Credit Spread, look to take profits at 50% and cut losses at 100%:

• Take Profit: $1.95 Debit
• Stop Loss: $7.80 Debit

View PDD Trade

View Closing Trades

Closing Trades

• LUV – 80% Loss: Long Dec 17, 2021 52.5/60 Call Vertical @ $0.40 Credit

DailyPlay Positions Outlook:

The major indices suffered losses during the last hour of trading yesterday which saw SPY declining towards the $450 support and QQQ once again rejecting all-time highs at $382 to end the day at $380. Big Tech earnings is set to continue this week and will provide direction in the short term for equities as we have Apple and Amazon both reporting at the end of the day. 

We take this opportunity to close out LUV for an 80% loss. LUV invalidated our bullish thesis yesterday after breaking below the $47 support level.

Prakash Vijayanath
Analyst at OptionsPlay

View Closing Trades

Closing Trades

• PTON – 29% Gain: Long Dec 17, 2021 80/85/105 Call Spread Risk Reversal @ $5.50 Credit
• KWEB – 16% Loss: Long Dec 17, 2021 50/58 Call Verticals @ $2.45 Credit
• AMAT – 90% Loss: Short Nov 5, 2021 130/140 Put Verticals @ $6.53 Debit

DailyPlay Positions Outlook:

As earnings season continues, equities remain elevated with what has been a surprisingly positive Q3 for the majority of companies in the S&P 500 so far. The tech giants are set to provide an additional boost for the major indices with Alphabet and Microsoft both posting encouraging numbers. SPY and QQQ continue to grind higher with SPY pulling back slightly from session highs yesterday and the Nasdaq 100 inching closer to its previous all-time high. 

We take this opportunity to close out PTON for a 29% gain before earnings next week. KWEB failed to breakout thus invalidating our bullish thesis and will be closed for a limited loss. AMAT failed to breakout higher as well and price action remains rangebound. 

View AAPL Trade

The bearish DailyPlay for Tuesday, October 26th is Apple Inc (AAPL). AAPL is part of the Technology Sector (XLK) which has experienced a 1.4% rally in the last month. Please note that this is a bearish earnings play on AAPL which will release earnings this Thursday.

Technical View

• Failing to break above $150 resistance
• Slowing momentum after a sharp rally. 
• Credit Spread collects 34.5% of vertical width. 

Fundamental View

• 14% of Apple’s production base in China has been impacted by power issues. 
• Deceleration in services y/y growth from 33% to 27%. 
• Earnings: Oct 28 (2 Days)

View AAPL Trade

 View FB Trade

Bullish – FB – $324.61

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Market Outlook:
As we head into earnings season, equities have performed well with the major indices recovering considerably in the last 2 weeks. SPY has rallied back to its previous all-time high at $453 while QQQ ended the week pulling back slightly back to $374. Fundamentals will play a big part this week with 4 out of the 5 FAANG stocks announcing earnings (AAPL, AMZN, FB, and GOOGL). US GDP numbers will also be released on Thursday and will provide additional insight as to how well the economy performed despite headwinds caused by the Delta variant spread, labor shortages, and supply-side constraints. Over the last week, there has been a considerable rotation out of Energy, Staples, and Financials while Discretionary and Tech have seen strong momentum and will likely provide leadership this week.

FB Bullish Trade Idea:
Our bullish trade idea today is Facebook Inc (FB). FB recently pulled back significantly and found support near the $320 level. Price has been under pressure due to SNAP’s disappointing earnings announcement, however, this may be an overreaction when considering that FB and SNAP’s business model is considerably different. Please note that this is an earnings trade with FB announcing earnings today after the market close. View FB Trade

Sector Outlook

The Relative Rotation Graph (RRG) for sector rotation indicates that a broadening sector leadership with 7 sectors in the Improving and Leading categories and 4 sectors in the Lagging and Weakening categories.

Leading (positive relative trend and positive relative momentum): Discretionary, Industrials and Materials. However, only Discretionary showing strong momentum. Weak momentum in Industrials and Materials.

Weakening (positive relative strength and negative relative momentum): Financials and Energy are in the weakening category with poor relative strength and momentum. 

Lagging (negative relative trend and negative relative momentum): Communications and Staples are in this category and continue to experience weak momentum and relative strength. 

Improving (negative relative trend and positive relative momentum): 4 sectors are now in the Improving category – Technology, Real Estate, Utilities and Healthcare which rotated out of the Lagging category on Friday.  

XLV

Healthcare stocks have shown strong momentum this week with the sector rotating out of the Lagging category and into the improving category. Price recently broke above the 100 D MA after a pullback to the $124 area. Look for a continuation of rally back to $236 resistance. 

XLRE

Real Estate recently formed a double bottom at the $44.23 level and bounced higher with strong momentum. Price is currently rallying towards its previous all time high at $48.80. Look for continued rally this week. 

Market Observations

• TSM – Price has failed to break above the 100 D MA on multiple attempts and moved 1.77% lower on Friday. Next support sits at $108.
• CMCSA – Price broke below the $54.50 support level and has since come back to retest it. This provides a good risk/reward bearish entry. 
• DIS – Currently at major support. Look for bullish price action at current levels for further confirmation of long entry. 

View Closing Trades

Closing Trades

• PYPL – 66% Gain: Short Nov 26, 2021 265/285 Call Verticals @ $2.45 Debit
• CVS – 8% Gain: Long Nov 19, 2021 85/92.5 Call Verticals @ $2.83 Debit

DailyPlay Positions Outlook:

Equities have staged a strong rally back to all-time highs on the S&P 500 driven by strong consumer demand and sales. It should be noted that while there is strong positive momentum, it has started to decelerate and show signs of exhaustion. Bond markets have also not shown the same level of optimism and we remain cautiously bullish as volume has declined on this rally. We are taking this opportunity to take profits on our PYPL short and reduce long exposure in our CVS position that has failed to rally higher. 

View Closing Trades

Closing Trades

• NFLX – 2% Loss: Long Nov 19, 2021 635/665/690 Call Butterfly @ $5.39 Credit
• TLT – 51% Gain: Short Nov 26, 2021 146/150 Call Verticals @ $0.73 Debit

DailyPlay Positions Outlook:

This earnings season has been punctuated with sizable moves on both beats and misses. The equity market’s momentum has started to stall and now within 1% of a new all-time high. During this, bonds have continued to sell-off sending yields higher, which will provide a headwind for equities. We are taking this opportunity to close out our NFLX trade which did not pop higher on earnings, and short bonds trade, which have triggered our take profit levels. 

View WFC Trade

The bullish DailyPlay for Wednesday, October 20th is Wells Fargo (WFC). WFC is part of the Financial Sector (XLF) which has experienced a 9.19% rally in the last month. 

Technical View

• Breaking out above its $48.50 minor resistance and trendline suggests further upside
• Technical Score that has improved to 9 out of 10 
• 1M and 6M trends turned bullish 3 days ago. 

Fundamental View

• WFC trades near its long-term historical valuation of 13x 2022 Earnings. 
• Expecting an acceleration in revenue growth to reach 3-4%
• Non-interest income continues to grow and offset declines in NII. 

As this is a Credit Spread, look to take profits at 50% and cut losses at 100%:

• Take Profit: $0.69 Debit
• Stop Loss: $2.76 Debit

View WFC Trade

View KWEB Trade

The bullish DailyPlay for Tuesday, October 19th is China Internet ETF (KWEB). KWEB has experienced a 3.82% rally in the last month. 

Technical View

• After a 60% decline from the Feb top, KWEB has formed a double bottom formation
• Technical Score that has improved from its bottom to 2 out of 10 
• 1M Bullish and Neutral 6M trends improved over the past 2 weeks.

Fundamental View

• Chinese gov’t has softened its tone on crackdowns as citizens start to feel the effects
• Evergrande’s fallout has driven a more accommodative monetary policy
• Chinese internet companies are trading at multi-year low valulations

As this is a Debit Spread, look to take profits at 75-100% and cut losses at 50%:

• Take Profit: $5.80 Credit
• Stop Loss: $1.45 Credit

View KWEB Trade