By Dan Darrow

November 02, 2022

Today's Trade Ideas

Symbol: STX

Style: Swing

Strategy: Put Spread


Long Dec16 $50 put

Short Dec16 $42.50 put

Action Area: $2.15 - $2.55

Comments: STX is a bearish trade idea. A weak quarter from STX should not have been a surprise (considering recent earnings/commentary in the Memory space), but the magnitude of the guide down on earnings last week managed to surprise some traders. STX, which had been working on a reversal higher into the print, quickly dropped back under the 8day ema and 20day sma, and it came close to retesting the previous October low (49.62) before recovering. The stock failed to reset back above those two moving averages the following couple of sessions and has started to steadily walk lower into 50 again, setting up a near-term breakdown. Under 49.62, STX should build momentum for a move into the mid-40s, and the Dec16 put spread will be targeting an initial move to <47.50 to begin locking in money. The swing trade will have a tight stop above 53 (above the 20day sma) or a 40-50% net debit loss, whichever happens first.

Symbol: GILD

Style: Swing

Strategy: Long Call

Contracts: Dec16 $80 call

Action Area: $1.60 - $1.95

Comments: GILD is a bullish trade idea. GILD popped sharply higher after a surprisingly big beat and raise on earnings last week, and it has formed a textbook bull flag below 80 in the past three sessions. Buyers have shown consistent interest around 77.50 each day this week, and the stock should trigger a near-term breakout soon as the 8day ema quickly rises underneath. On a clean move above 80, GILD should have a path to the mid-80s to retest levels from early 2021, and the Dec16 call will be targeting an initial move to 81.50+ to begin locking in money. The swing trade will have a tight stop below 75.25 or a 40-50% net debit loss, whichever happens first.

On The Radar

BIIB is acting well. After turning the corner two weeks ago, BIIB has started to stabilize around 280 and right at the Data day high (283.44) as the 8day ema walks higher. A firm break and hold above 284-285 now should get momentum building for a run into the 290s, so we can be patient with the Dec16 call spread and wait for a move to 289+ to begin scaling back risk on the trade. 

Software stocks were broadly lower today, including S, which came close to retesting its October low intraday. After consolidating around 23 for the past week, S has turned lower quickly this week, with today’s drop coming within $.31 of the October low (20.29). Following the lackluster close, there is a chance that level gets tested tomorrow, so we will be paying close attention to how the stock acts in that area. If the previous low begins to turn into support, it may make sense to close the remainder of the Nov18 put spread, but if the stock breaks the low and slides under 20, it could build momentum quickly on the downside.

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 November 02, 2022