By Dan Darrow

December 08, 2022

Today's Trade Ideas

Symbol: CLF

Style: Swing

Strategy: Long Call

Contracts: Jan20 $16 call

Action Area: $1.25 - $1.60

Comments: CLF is a bullish trade idea. Steel stocks have been acting well for several weeks, with many of the key players in the sector near their best levels in months (STLD is actually at a new 52-week high). CLF has been a laggard among the sector, though recent action is indicating it may be ready for some catch-up. CLF is off its early November low, but the bounce during the month stalled at previous resistance around 16 and the 100day sma. That moving average continued to act as resistance through the end of the month, but the stock has pushed past it this week and is beginning to consolidate above it. Above the 100day sma, there is an open path to the high teens, and with many peers at much higher levels, momentum should build quickly on CLF. The Jan20 call will be targeting an initial move to 18+ to begin locking in money, and the swing trade will have a tight stop below 14.75 or a 30-40% net debit loss, whichever happens first. 

Symbol: OKTA

Style: Swing

Strategy: Call Spread


Long Jan20 $65 call

Short Jan20 $75 call

Action Area: $3.05 - $3.60

Comments: OKTA is a bullish trade idea. Last quarter’s earnings disappointment from OKTA led to a crash on the stock, sending it into a spiral lower through the beginning of November. While it went into last week’s print off its low, it was still down ~40% since the late August report and in need of good news to stem the selling. A strong beat and a solid guide did the trick. OKTA surged into the high-60s on the day of its results, narrowly missing the 100day sma the September gap high (69.34). It has since pulled back, but buyers have shown interest above 60, with the 8day ema recently joining underneath to help set a near-term floor. With rising support and open room to the upside, OKTA looks set up well for another leg higher, and the Jan20 call spread will be targeting an initial move to 67.50+ 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 Dec09 expiration, and there are no positions set to expire. With the PPI due out before the open and a possible warm-up for the CPI next week, there is a chance we see higher volatility during the morning, so be on the lookout for updates early tomorrow!

Late last week and earlier this week DKNG bumped into the key 200day sma again, and as has been the case for several months, the stock was met with aggressive selling at the moving average. The sharp green-to-red reversal on Monday started a slide lower on the stock below 14.50 and all moving averages, and while it bounced today, it failed to reset above them. If DKNG continues to hold under 14.50, it should start to build momentum to the downside, and there is an open path to <12.50 once it starts to fall. The initial Dec30 put was rolled down a few weeks ago, so we can sit tight on the current position for now, but if the stock doesn’t make a decisive move lower by the end of next week, we will need to start thinking about rolling the trade out to buy more time. 

Something has to give on ALLY soon. The stock has been under pressure for weeks, and the recent steady selling has knocked it into the key 25 support level, where it has been spinning around for several days. With a complete lack of buying interest recently, the stock looks to be setting up for a near-term breakdown, but it needs a decisive move under 24.50 now to start the ball rolling lower. The previous Dec16 put spread was rolled out to Jan20 expiration last week, so there is plenty of time to be patient with this trade as it develops. We will be looking for a move <24 to start locking in more money.

Open Positions

* The following Open Positions pertain to the Options In Play trade ideas from this and previous editions. Disclosure of the Trader Co-Author’s actual portfolio holdings, as of the date of each publication, is made below under "Trader Author Portfolio Holdings.".

Trader Author Portfolio Holdings

**As of 4pm ET December 08, 2022