Taking Profits

• COUP – 49% Gain: Feb 18, 2022 $145/$155 Call Verticals​ @ $1.90 Debit

DailyPlay Positions Outlook

The flight to safety continues as equities continue to sell off and sink past major support levels. The VIX is showing signs of another spike to the 30 level as systemic risk continues to pick up. While disappointing banking earnings was the catalyst for the recent decline in equities, concerns over inflation and consumer spending still remain. This has impacted the cyclical sectors more than most which continue to add pressure to the major indices. We take this opportunity to close the bearish COUP trade ahead of the weekend for a 49% gain. 

Prakash Vijayanath

Analyst at OptionsPlay

Closing Trades

• LYFT – 91% Loss: Short Feb 18, 2022 $40/$45 Put Vertical @ $4.10 Debit

DailyPlay Positions Outlook

The SPY has now broken below the key $453 level which is concerning as the next support level is near the $435 level – a significant decline should the sell-off continue. The main theme in markets remains to be the rotation out of risk and into safer value stocks with the Growth/Value ratio chart showing growing strength in value relative to growth. For this reason, we cut losses on our bullish LYFT position that has declined below the $37 support level. 

Prakash Vijayanath

Analyst at OptionsPlay

• LOW – 59% Gain: Short Feb 18, 2022 $250/$260 Call Vertical @ $1.69 Debit

DailyPlay Positions Outlook

After a poor start to the week, equities continue to decline after a disappointing Goldman Sachs earnings report yesterday. SPY looks set to continue its decline back to the $453 major support level while QQQ broke below its long term ascending trendline as price falls further with support only sitting at $360. Our outlook for equities remains neutral with a short-term bearish bias as rising yields and earnings uncertainty continue to pressure the major indices. We take this opportunity to close our bearish LOW trade earlier than expected after price broke below the 55 D EMA yesterday. 

Prakash Vijayanath

Analyst at OptionsPlay

View KMI Trade

Market Outlook:

As head into another week of earnings season, equities continue to showcase a neutral tone with key levels in the SPY being respected and price continuing to move sideways. This earnings season will likely prove to be a catalyst for a continuation of the equity rally or a further pullback. The other main theme in markets currently is inflation and how aggressive the Fed will be with regards to their hiking policy. Raising rates has caused a sell-off in growth stocks as well as the Tech sector which has experienced significant outward rotation as investors seek safety. 

KMI Bearish Trade Idea:

Our bearish DailyPlay today is Kinder Morgan Inc (KMI). Kinder Morgan is part of the Energy sector. While Energy is the strongest sector currently, KMI is underperforming the overall sector heading into earnings. Price action has been bullish but has also reached an overbought condition is a short space of time. This provides a good risk/reward bearish entry heading into earnings as KMI is overbought despite the overall trend being bearish. Please note, this is an earnings play with KMI announcing earnings tomorrow. The trade structure used for this bearish play is a Put Debit Spread. 

View KMI Trade

The bearish DailyPlay for Friday, January 14th is Coupa Software Inc (COUP). COUP is part of the Technology sector that is currently lagging against the overall market.

Technical View

• Recent retracement higher provides a good risk/reward bearish entry point
• Bearish 1M and 6M trends. 
• Very weak Technical Score (2 out of 10)

Fundamental View

• Negative EPS and high valuation (30x P/E) in a hiking interest rate environment makes COUP vulnerable for further declines. 
• The application software sub-industry continues to underperform the overall market on a relative basis. 
• Earnings: Mar 15, 2022 (60 days)

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

Take Profits: $1.85 Debit

Stop Loss: $7.40 Debit

View COUP Trade

The bearish DailyPlay for Thursday, January 13th is Lowe’s Companies Inc (LOW). LOW is part of the Discretionary sector that is currently underperforming the S&P 500. 

Technical View

• Negative divergence occurred when price made new highs but momentum made lower highs. Typically a strong bearish signal. 
• Bearish 1M trend. 
• Failing to break above 55 D EMA as momentum continues to slow. This provides evidence of a further decline and possible break below the $240 support level. 

Fundamental View

• Poor sub-industry outlook as homebuilders as consumer spending starts to slow. 
• Inflation and labor shortages are major headwinds. Construction wages have risen 7.7% since pre-Covid levels. 
• Earnings: Feb 23, 2022 (41 days)

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

Take Profits: $2.05 Debit

Stop Loss: $8.20 Debit

View LOW Trade

The bullish DailyPlay for Tuesday, January 12th is Diamondback Energy Inc (FAND). FANG is part of the Energy sector that is experiencing very strong momentum and is providing leadership for the broader equity market. 

Technical View

• Breakout of the $116 resistance level and pullback provides a good bullish entry. 
• Bullish 1M and 6M trends
• Very strong Technical Score (10 out of 10)

Fundamental View

• Rapid rise in crude oil has boosted cash flow significantly.
• Average debt levels relative to peers but strong improvement in operating costs. 
• Earnings: Feb 22, 2022 (41 days)

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

Take Profits: $2.92 Debit

Stop Loss: $11.70 Debit

View FANG Trade

Closing Trades

• BAC – 51% Gain: Long Jan 21, 2022/Apr 14, 2022 45/47 Call Diagonals @ $2.80 Credit
• DFS – 78% Loss: Short Feb 18, 2022 115/125 Call Verticals @ $7.30 Debit

DailyPlay Positions Outlook

Equities continue to decline as markets await CPI data releasing tomorrow. This will likely provide more clarity as to how aggressive the Fed will be regarding rate hikes and policy tapering. Despite the recovery late into yesterday’s session, equities remain on the backfoot and a shift towards risk-off names continues. We take this opportunity to close out our DFS position before the 100% stop loss as our technical thesis has become invalidated with prices rallying above $120 with strong momentum. We will also be taking profits early on the BAC position which is a call diagonal trade. This is due to the short strike being ITM with very few days to expiration. Rolling the short strike would result in an increased cost basis for the overall trade which is why we are opting to close the position for a 51% profit instead. 

Prakash Vijayanath

Analyst at OptionsPlay

View CSCO Trade

Market Outlook:

A volatile week saw the S&P 500 as well as the Nasdaq-100 end the week in the red. Both indices broke below their respective key levels which indicates further declines ahead for this week. However, the VIX has declined for 2 sessions in a row despite declines in the major indices. This can sometimes be used as a short-term bullish signal as the bearish move is displaying signs of slowing momentum – A move lower in the major indices and a move lower in the VIX can act as a reversal signal. However, we view the overall macro picture as slightly negative for equities as markets continue to price in an additional rate hike for 2022 despite Friday’s low non-farm payroll number. We expect another volatile week as inflation numbers are released and continue to be a key theme in markets. 

CSCO Bullish Trade Idea:
Our bullish trade today is the Cisco Systems Inc (CSCO). CSCO’s strategy in transitioning to a higher-margin services type business is continuing to pay off. From a technical perspective, CSCO recently broke above the $60 resistance level with strong momentum and has pulled back to this level to provide a better risk/reward bullish entry. On a relative basis, CSCO is starting to outperform the communications sector which it is highly exposed to as well as the technology sector. 

As this is a long call vertical spread, look to take profits at 75%-100% gain and cut losses at 50%:

• Take Profits: $5.10 – $5.82 Credit
• ​Stop Loss: $1.46 Credit

View CSCO Trade

Taking Profits

• GLD – 17% Gain: Short Jan 21, 2022 $167/$172 Call Vertical @ $1.43 Debit

DailyPlay Positions Outlook

Equities look set to end the first week of 2022 on a bearish tone. Both SPY and QQQ have declined to their respective key levels. Volatility has started to increase as markets price in an additional rate hike for the year with the Fed minutes indicating a more hawkish tone. We expect some volatility today due to Non-Farm Payrolls being announced and have therefore decided to close the GLD trade for a minor profit. 

Prakash Vijayanath

Analyst at OptionsPlay