By Dan Darrow

December 21, 2022

Today's Trade Ideas

Symbol: CAT

Style: Swing

Strategy: Call Spread


Long Jan20 $242.50 call

Short Jan20 $252.50 call

Action Area: $3.80 - $4.30

Comments: CAT is a fast-developing bullish trade idea. CAT first hit 240 early in November as momentum continued following its October earnings release, then after failing and rolling into the 8day ema, the stock made another run at the level a week later. The second test of 240 also failed, as did the third and fourth tests of that level over the past few weeks. CAT has consistently found buyers in the mid-to-high 220s on dips, though, and a strong week has the stock right back at the critical 240 level again. A clean break of resistance should lead to a quick extension into the high-240s/250 area, and the Jan20 call spread will be targeting an initial move to 246+ to begin locking in money. The swing trade will use a 30-40% net debit loss as a stop.

Symbol: PFE

Style: Swing

Strategy: Long Call

Contracts: Jan20 $51 call

Action Area: $1.65 - $1.95

Comments: PFE is a bullish trade idea. A covid surge is gripping China as the country reopens, and that could be a tailwind for PFE. The big Pharma giant was approved to sell Paxlovid in China, and sales recently started, with reports indicating supplies are selling out fast. Whereas the company splits revenues with BNTX on the covid vaccine, Paxlovid is wholly owned by PFE, and an uptick in demand in China is a positive for the stock. PFE recently rolled into the 20day sma to retest the bottom of its three-month uptrend, and buyers have stepped in to defend the moving average well. Previous dips into the 20day sma have led to quick reversals higher, and the Jan20 call will be targeting an initial move back up to 53.25+ to begin locking in money. The swing trade will have a tight stop below 49.75 or a 30-40% net debit loss, whichever happens first.

On The Radar

We can tighten the stop on PYPL. The stock lost the recent low last week, and it has spent the first three sessions of this week consolidating under 70. The 8day ema has joined overhead and should begin to start pressuring the stock lower, and the 52-week low (67.58) looks likely to get tested soon. The initial Jan20 put spread was rolled down, and now we can tighten the stop on the remainder of the position to 71.25, which would be a decisive break back above the 8day ema. 

MNDY acts well. Tuesday’s dip below the 200day sma was short-lived, with today’s rebound sending the stock back above the key recent level. MNDY attempted to push into the low-120s today but ran out of gas in the afternoon, though the solid finish may set up that move tomorrow. Momentum will likely build quickly once it starts to clear 122.50-123, so we will be watching for a move to >126 (dropping the initial target slightly) to begin locking in money on the Jan20 call spread.

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 21, 2022