By Dan Darrow
December 01, 2022
Today's Trade Ideas
Strategy: Call Spread
Long Jan20 $50 call
Short Jan20 $57.50 call
Action Area: $1.45 - $1.80
Comments: NEM is a bullish trade idea. It’s been a while since we were involved with GLD or Gold Miner options, mostly due to choppy, directionless action the past few months. The clean breakout and large run in November came as a surprise, and since we had no positions on at the time, I have been keeping an eye on charts in the space to see if new, higher bases formed (which they have). NEM has been an underperforming Gold Miner since July’s high volume washout on earnings. The stock struggled to rebound back above 47 throughout August, and it came nowhere near retesting that level until mid-November when the stock surged into it post-CPI reading. Sellers stepped in around 47 again, though, to keep a lid on the rally for most of November, but a new area of support formed around 45, while the 8day ema and 20day sma joined underneath. Yesterday’s large volume break of 47 triggered a breakout on the stock, and today’s close above that level for the second consecutive session confirmed the move. NEM now has a path to the low-50s to close the 7/22 gap (51.39), and the Jan20 call spread will be targeting an initial move to 50.75+ to begin locking in money. Because the trade revolves around the breakout holding and building momentum quickly, the position will have a tight stop below 46.50 or a 30-40% net debit loss, whichever happens first.
Strategy: Put Spread
Long Dec30 $148 put
Short Dec30 $142 put
Action Area: $2.30 - $2.70
Comments: XOP is a bearish trade idea. E&P names have been resilient in the face of lower Oil recently, but momentum looks set to turn lower soon. XOP has treaded water above 150 since the start of November, shrugging off the recent sharp reversal lower on Oil during the month. The ETF had been riding the 8day ema and 20day sma higher up until Monday, with the gap lower knocking it below both key moving averages. XOP has consolidated in a lower range under those moving averages this week, and today’s early rally and failure marked a backtest of the 20day sma. On a clean break of 149 now, XOP should build momentum lower into the mid-140s and the 50day sma (145.40), and the Dec30 put spread will be targeting an initial move to <145.75 to begin locking in money. The swing trade will use a 30-40% net debit loss as a stop.
On The Radar
Tomorrow is weekly Dec02 expiration, and there are no positions set to expire. With the monthly jobs report due out before the open, though, it may end up being a volatile morning, so be sure to keep an eye out for updates early!
With another sharp move higher on QQQ and SPY, the Dec16 hedges continue to move further out of the money, but we are going to hold off adjusting the contracts for a few sessions. The biggest events in December will be the CPI reading and FOMC meeting on 12/13-12/14, so we want to get new hedges in place closer to that date, with contracts that are relatively close to the money. The plan will be to wait until later next week to start adjusting the hedges unless there is a materially negative reaction to the jobs report tomorrow.
Something has to give on ENPH. One of the leading Solar stocks, ENPH has been in an increasingly tight pennant above 300 with strong support from the 8day ema and 20day sma underneath. The stock has repeatedly failed to clear 320 recently, though, and this morning was another breakout attempt that failed. The Dec16 call fly roll up is beginning to run low on time, so we will need to pay close attention to the stock over the next several sessions. If ENPH doesn’t clear 320 by Wednesday, or if it loses 299 over the same time period, we will need to manage the trade.
Trader Author Portfolio Holdings
**As of 4pm ET December 01, 2022